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RE: Isn’t a split a sign the company is a little shy on cash flow?

It’s really hard to tell the ultimate motive.

A stock split is simply when the company takes each slice of the pie and cuts them into even smaller pieces.

So for instance, where the pie may have previously had 10 million slices, now it has 20 million. The important thing is that THE PIE IS STILL THE SAME SIZE! It just has more pieces.

By the numbers, it has no effect on your economic stake in the company.

But there are other reasons why a split is beneficial.

1. It Expands the shareholder base. Many small or beginning investors start by investing in small amounts. If they have only $1,000 to invest, their entire investment would not even buy one share of Amazon before today.

So, by keeping share prices at reasonable levels, companies encourage investment by even the smallest market entrants.

2. It Makes portfolio management easier. It is a pretty common activity in portfolio management to rebalance positions or to sell a portion of one investment to fund a new one. High per-share prices make this more difficult, as you are dealing with larger chunks of your portfolio with each share.

3. They typically outperform the market over the next several years. In a study performed by David Ikenberry of Rice University, he found that stock splits substantially outperformed the market over both 1 and 3 year periods from the date of the split. What better beneficial reason could an investor want?

I believe Bezos is doing this in hopes of becoming the richest again. More people buy the stock. The price goes up. He can buy another yacht.

However Elon Musk and Tesla will have a stock split vote on August 2nd. I do not know what the split will be but buy when you start seeing the run up in stock price before the announcement. In August 2020 Tesla went from just over $1,300 a share to splitting at over $2,000 a share in just 3 weeks. Then by January 2021 it was around $1,000 before falling back.

My AMD stock that I have and Tesla announce earnings on the same day and the following week is when the stock split decision will be made.

Do I stay with AMD and know it will get to $200 eventually or buy Tesla and hope it repeats what happened in August 2020? My plan would be to sell Tesla after and fallback to AMD after the hopeful run-up in Tesla price.

Decisions decisions.