Apple’s stock price soared big time for a single day last week the day after the company released unexpectedly favorable earnings for the March quarter. It was partly due to the fact that iPhone sales really exceeded most analyst estimates, and even the Mac did well. The iPad, well, not so much.
But Apple also pulled what some might regard as a pair of financial stunts to move the stock forward, although there is surely solid value to investors in what they did. First, the stock buyback program was increased by some $30 billion to $90 billion, scheduled to conclude by the end of 2015. The second was an unusual seven-to-one stock split, meaning you get seven shares for each one you own.
Now I’m not a Wall Street investor and I don’t play one on TV or radio, so I won’t presume to second guess the value of such clever maneuvers. Cutting back on the number of available shares in a company makes the remainder more valuable. A lower stock price, because of the split, means that it becomes more affordable for individual and institutional investors. That’s supposed to be a good thing.