What today's era has in common with the dot-com boom is that these moves are also being driven by retail investors. After General Electric, one of the most valuable companies in the U.S., bounced following a stock split, Argus Research analyst James Kelleher explained at the time, "From a mathematical point of view, this doesn't add value, but it's a strong psychological move." Yahoo!, as big a dot-com darling as any, split its stock three times during the boom.īack then, Cantor Fitzgerald chief market strategist Bill Meehan said the fervor for stock splits had become a "retail phenomenon," referring to retail investors, and commentator Herb Greenberg derided the trend, saying, "This split thing is getting way out of hand." A retail phenomenon 28, 1999, following a split announcement. Other examples of individual stocks soaring on splits abound. The stock crashed by more than 85% from 2000 to 2002, and the company has yet to do another stock split despite massive gains. Amazon, as it rose nearly 2,000% from the beginning of 1998 to the end of 1999, split its stock on three separate occasions. The dot-com bubble is remembered mostly for the euphoria over newly created internet stocks that led to a boom and bust, but stock splits helped drive much of the fever in the early days. Generally, splits don't elicit much of a response from investors, but at times they can spark rallies of their own.
Though they are generally perceived as a bullish signal, they don't change any of the fundamentals of the company or the value of the shares. While splits don't add to the value of the stock, they increase the availability of shares by lowering the price, making them more accessible to retail investors, and indicate that management expects the share price to continue to rise. Monday's gains culminated a remarkable rally set off by a frenzy ahead of the stock splits. Tesla, whose shares split 5-for-1, surged 12.6%, adding more than $50 billion to its market cap, while Apple gained 3.4% after splitting its shares four ways, tacking on more than $70 billion in market value. Instead, they've merely announced that they're splitting their stocks, and on Monday, both stocks jumped after their respective splits were completed. These companies haven't unveiled a groundbreaking product, made a major acquisition, or entered a new market.
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