Netflix Spreet Split: Shares are about to get 10x cheaper
Netflix is planning a 10-to-1 stock split in the move that will make the shares easier to buy.
The broadcaster approved the measure on Thursday. A stock split involves dividing the entire stock at a rate determined by the company, resulting in a lower price per share.
In the case of Netflix, participating investors of Netflix Stock will receive nine additional shares after the closing bell on November 10. The shares will begin trading at a modified price separately when the market opens on November 17.
The maximum 10-to-1 split does not change Netflix’s fundamentals in any way but is intended to make the shares “more readily available to employees who participate in [c]The company’s stock option program,” Netflix said in a statement. Others may benefit, too, including existing shareholders and new investors who may find the barrier to entry very low.
After the Stock-Split announcement, Netflix Share prices jumped as much as 4%, but retreated to post-price levels of around $1,090 on Monday. Year to date, Netflix shares are up nearly 23%.
Why do companies split their stock?
Netflix joins a long list of companies to split their stock recently. Notably, Nvidia and Chichitle both split their stock last year. Netflix itself has split its stock twice before, in 2004 and 2015.
There are many reasons why companies split their stock this way, but the result is often the same: low-value stocks find it easier to trade. Large companies sometimes do this after the share price exceeds a certain threshold, such as $1,000 per share.
Netflix, which went public in 2002 with shares at $15, crossed the $1,000 mark in April and continues above it.
“A psychological barrier can occur in trading high-priced stocks,” Finra, a self-regulatory agency, explains on its website. “A very high stock price can scare away investors who fear there is little room for growth.”
Availability is another big plus.
Like Fractional-Share investing – which involves buying or selling fractions of shares differently – they are more inclined, stock splits have very little, shares that can be invested at any price and receive various shares equal to the amount spent. However, some trading platforms still have restrictions on various stocks.
For example, ally investing does not allow risk-sharing trading, and trading prohibits outright fractional-share purchases. Bank of Merrill Edge has limitations, too.
Assuming Netflix’s Share prices remain stable for a few weeks, investors will be able to snap up a full piece of the streaming company for around $100 a pop – regardless of how they sell.
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