Timeline for Why doesn’t the stock price fall after the record date for a company splitting stock?
Current License: CC BY-SA 4.0
8 events
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Jun 30, 2021 at 20:39 | comment | added | chepner | So effectively, the record date means nothing to you personally; it only determines who receives new shares directly from the company and who receives new shares from the broker of the person they bought shares from. (2/2) | |
Jun 30, 2021 at 20:37 | comment | added | chepner | Your shares don't actually split. Instead, you receive new shares to bring your total count up to 4x your holding on the record date. If you sell any shares between the record date and the split date, your broker forwards the corresponding new shares to the new owner. Only on the morning of the split date, once all parties have received the new shares they are entitled to, is the price adjusted to be 25% of the previous night's closing price. (1/2) | |
Jun 30, 2021 at 14:14 | comment | added | D Stanley | You won't buy a share for $100 after the record date. Before the record date you'll pay $100 for shares and get a second share eventually, ending up with 2 $50 shares. After the record date you should pay $50 for the shares and you won't get a dividend (stock or cash). How the broker reflects that I'm not certain, but there's no "free money", no profit, and thus no immediate tax effect. | |
Jun 30, 2021 at 14:11 | comment | added | Joe | I understand that for the monetary dividend. I think my confusion comes with the price adjustment post split. If I buy a share at $100 between the record date and the split date, after the split date will that price not be marked down to $50 (in a 1:2 split)? If you don’t get the share dividend (2 new shares worth 50 each) how will the old value be reflected in my brokerage account? Is my price never adjusted? | |
Jun 30, 2021 at 14:05 | comment | added | D Stanley | Suppose there's a company worth $100 per share and it announces a $5 dividend. If you buy the stock before the record date you pay $100 to get the stock and get a $5 dividend, which leaves you with a $95 stock. If you buy after the record date you pay $95 for the stock and get no dividend. So your ending wealth is the same in either scenario. You have $95 less cash and a $95 stock. | |
Jun 30, 2021 at 14:03 | history | edited | D Stanley | CC BY-SA 4.0 |
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Jun 30, 2021 at 14:02 | comment | added | Joe | So between the record date and the payout date if you buy a share, how does that translate to holding the same value post split if you don’t get the dividend? I’m wondering about the mechanics. Is the price of your share just never adjusted down? | |
Jun 30, 2021 at 13:57 | history | answered | D Stanley | CC BY-SA 4.0 |