For investors, stock splits are mostly magic tricks. They don't change the content of the stocks being split, but they somehow make everything seem more accessible and in some ways more exciting.
Simply dividing the same business ownership into different numbers of slices usually increases the number of shares and lowers the stock price. The total value of the stocks themselves or the holdings in your brokerage account remains unchanged. For example, let's say you own a stock that costs $400 per share. If the board decides on a 4-for-1 stock split for him, he will own four shares worth $100 each.
But it's not all accounting smoke and a reflection of herd psychology. Not all investors can buy fractional shares. It's more comfortable to keep tracking stocks within a comfortable price range.
Stock splits grab the headlines, but the real question is why companies choose these moves. It's often reasonable to think of stock splits as a vote of confidence in a company's future, suggesting that the company's management expects the stock to continue rising above its already high price tag.
In that regard, data analysis experts micro strategy (NASDAQ:MSTR) Seems like a reasonable stock split candidate. In a bold strategic shift, the company has essentially become a direct investor in cryptocurrencies, with the stock currently trading at just over $500.
Should you be keeping a close eye on the stock split calendar in hopes that MicroStrategy's name pops up soon? Let's take a look at the situation with MicroStrategy.
The history of stock splits
MicroStrategy isn't exactly new to the stock split space. The company has split its stock twice over the years. Bitcoin (Cryptocurrency: BTC) There was even:
|
date |
Stock split ratio |
|---|---|
|
July 31, 2002 |
1 in 10 people |
|
January 27, 2000 |
2 to 1 |
Data source: Yahoo! Finance.
The first split took place during the height of the dot-com bubble, just before pop. After entering the public market in the summer of 1998 with a market capitalization of $734 million and a stock price of $106, the stock started the new millennium at $210 per share.
MicroStrategy had acquired a small data analytics company and spent millions of dollars on extravagant parties and commercials for the 2000 Super Bowl. After the split, the stock price quickly tripled again, and in a glorious moment in March 2000, MicroStrategy's market capitalization rose to his $24.7 billion. Although the company was never the largest technology company, MicroStrategy's market capitalization rivaled that of promising startups such as: apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) at that time.
Just then, the dot-com bubble burst. Free funding dried up for questionable online business ideas, with harsh consequences for the entire technology industry, including MicroStrategy.
By the end of 2001, Nasdaq Composite (NASDAQINDEX: ^IXIC) The index has fallen 58% from its all-time high. MicroStrategy's price fell 99% of his time, with a market cap of just $370 million and a stock price reset to $4.54 per share. So founder, CEO and chairman Michael Saylor swallowed the bitter pill of a 10-for-1 reverse stock split, lifting the stock out of penny stock territory and ensuring compliance with the minimum price requirements for listing on Nasdaq.
This isn't your grandfather's MicroStrategy
MicroStrategy's history of stock splits reveals how a company once caught up in the ecstasy of technology has had to face the harsh reality of a market correction. It's inspiring to see Michael Saylor continue to lead MicroStrategy as its executive chairman, despite the terrible times.
However, MicroStrategy today is significantly different than it was at the turn of the century. The company has made a bold pivot to become a significant player in the crypto space, converting most of its cash reserves into Bitcoin and acquiring more funds through various means to further build out its Bitcoin portfolio. has been procured. This tactic uniquely positions MicroStrategy at the intersection of business intelligence software and digital asset investing, with its exposure to cryptocurrencies explaining nearly all of its recent share price gains.
As the financial and technology landscape continues to evolve, MicroStrategy finds itself at an interesting crossroads. The stock price has quadrupled since the end of 2022, mirroring and amplifying Bitcoin's 166% rise over the same period.
MicroStrategy Forecast: Cloudy, Possible Stock Split
Therefore, the possibility of another stock split is starting to appear. Such a move would signal confidence in the company's future trajectory in the volatile realm of technology and cryptocurrencies.
Now, Mr. Saylor may be dragging his feet on the stock split decision. Because he doesn't believe in reminding investors of his company's embarrassing history of breakups. But other companies did the same thing during the dot-com bubble, including Amazon and Apple. These two former market minnows have recently returned to the stock division and are setting an encouraging example for other explosion victims.
In this new era, a stock split could serve multiple purposes for MicroStrategy. In addition to adjusting stock prices to more accessible levels, it could increase investor interest in his rapidly evolving two-sector companies.
It may be unhealthy to hold your breath until Saylor announces a MicroStrategy stock split, but I'm not against it either. If you want a leaner, sleeker version of MicroStrategy stock, it might make sense to keep an eye on the calendar for upcoming stock splits. Again, a split won't actually increase shareholder value, but it will certainly cause a lot of headlines. Whether a third split helps MicroStrategy's owners or not, that moment in Wall Street's attention may be what Michael Saylor decides to do.
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Stock Split Watch: Is MicroStrategy next? Originally published by The Motley Fool
