Alphabet (Google's parent company) approved a 20 to 1 stock split this week. This means for every one share you own of $GOOGL will be split into 20 shares on July 15th. This will lower the trading price of individual Google shares.
What is a stock split?
A stock split is when a company divides its shares, thus increasing its outstanding shares. When this happens, each individual share represents less ownership of the company. Theoretically, this shouldn't affect the price of the overall company, but trader phycology usually comes into play here boosting prices. Let's say Company X has 1,000 shares worth $100 each. Company X's board of directors elects to have a 10:1 stock split. After the split goes into effect Company X will now have 10,000 shares. Assuming the price stays steady, those shares will now be worth $10 as opposed to $100.
Why did Google split its shares?
Google is splitting for the same reason that most companies do: to lower the share price to appeal to more investors. With a current price hovering around $3,000/share, it can be intimidating for many new investors or investors with limited capital. The company's CFO, Ruth Porat, said in a Tuesday conference call, "The reason for the split is to make our shares more accessible."
Alphabet grew revenue by a whopping 32% year-over-year to $75.33 billion. And advertising sales grew by 33% year-over-year to $61.24 billion. Thus proving that growth potential isn't a worry for this long-standing tech behemoth.
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