Google parent company Alphabet will conduct a 20-1 stock split at the close of markets on Friday in a move that doesn’t change the overall value of the company’s stock but does reduce individual share prices and creates an easier entry point for smaller investors.

The search giant’s splitting exercise follows similar recent moves by a bevy of tech behemoths including Amazon, Apple and Tesla, which have all split their stock in the last couple of years.

While down significantly from an all-time peak value of $3,037 per share last November, Alphabet stock was trading at about $2,212 per share at midday on Friday.

What’s a stock split and why should you care? A stock split is when a company decides to divide its existing shares by a certain ratio to create new shares, which then lowers the individual share cost, according to a report from CNET. You still own the same portion of the company, though stock splits may temporarily increase stock price volatility, or the probability of large swings in the stock price.

Stock splits cause the total share count to increase and the stock price to go down. For example, if one share of GOOGL is worth $2,200 at the time of the split, a 20-for-1 stock split would turn that one share into 20 shares each worth $110. Shareholders should retain the full value of their investment before and after the split.

Alphabet’s planned stock split stipulates that, at the end of market close on July 15, shareholders will receive a one-time, 19-share payout for each share owned. These share dividends will be paid out only to “shareholders of record” — so, those who owned shares — at market close on July 1, per CNET. Google shares will proceed to trade at the adjusted split price on Monday, July 18. This will complete the 20-for-1 stock split first announced Feb. 1.

View Comments

Why is Google splitting its stock? A stock split is often a sign that a company is thriving and that its stock price has increased, according to Time/NextAdvisor. While that’s a good thing, it also means the stock has become less affordable for investors. As a result, companies may do a stock split to make the stock more affordable and enticing to individual investors.

“When a stock starts to creep up and looks expensive, it used to be common practice to do a stock split to make your stock look more attractive from a per-share price to encourage buying of the stock,” Meghan Railey, a certified financial planner and the chief finance officer and co-founder of Optas Capital, told NextAdvisor.

And while stock splits can increase a stock’s liquidity and make it more accessible for investors, not all companies engage in them. According to Railey, some companies prefer to keep their stock prices high.

“There are two types of companies,” Railey said. “Growth companies want to see their stock price go way up. Tesla is happy that their per-share price is high because it adds to the allure of their stock. Value stocks still have the opportunity to utilize stock splits to attract investors.”

Join the Conversation
Looking for comments?
Find comments in their new home! Click the buttons at the top or within the article to view them — or use the button below for quick access.