Mechanics of forward stock split

Question

Apple (AAPL) recently announced that they'll undergo a 4:1 stock split. Here are the relevant dates per a CNBC article:

The shares will be distributed to shareholders at the close of business on August 24, and trading will begin on a split-adjusted basis on August 31.

Let's say that I own 10 AAPL. If we take this statement literally at face value, it sounds like my brokerage account would credited with 30 additional stocks (giving me 40 total) on August 24 at the pre-split market value that's nearly $440 (as of August 5), and that the market price in the neighborhood of $100 would take effect on August 31. I do not believe that's what will happen for stockholders, so I'm trying to decipher the following questions since the article itself did not clearly articulate that from my perspective:

• When will the new shares from the split be credited to my brokerage account?
• When will the new stock price be reflected?
• If I was interested in purchasing a share on Wednesday, August 26, would that be at the post-split value? Or would there be any other nuances to that transaction?

Answer 1

Your confusion appears to be due to a poor summary in the CNBC article. Where they had:

The shares will be distributed to shareholders at the close of business on August 24, and trading will begin on a split-adjusted basis on August 31.

The actual Apple announcement linked in that article contains:

The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.

(Both emphases mine).

So the CNBC quote is really saying the extra shares will be distributed to "people who are shareholders at the close of business on August 24", not that the distribution takes place on the 24^th.

In fact, both quotes are – I believe – slightly misleading. From Stock Split Announcements on Rightline.net:

Key Dates For Splitting Stocks

Split Record Date – This is probably the most confusing term within a split announcement. The reason for this is that many investors are used to associating this date with a "cash" dividend. To receive a "cash" dividend you must own the stock on the record date. In the case of a stock split, the record date is meaningless. This in itself can make the record date key since those that don't understand this may be scrambling to go out purchase the stock in hopes of taking part in the split.

Split Pay Date – This is the date that the stock dividend or split will be paid.

Split Execution Date – This date is not often found in a split announcement, but it will always be the first trading day following the "split pay date." For example, if the pay date is on a Friday, then you can expect to see the affect of the split when the market opens on the following Monday. On this date the stock price will be adjusted and you should see the additional shares in your brokerage account. Brokerages can vary as to when they will reflect additional split shares in your account. Some will reflect it immediately on the execution date and others will wait several days until the actual certificates are received.

So, as Apple's Execution Date is 31^st August (Monday), then the Pay Date will be 28^th August (Friday). By Monday morning shares will have "magically" multiplied by four and the share price will have dropped to a quarter of its previous figure.

Any trades before the Monday will be at the current (pre-split) price, and be for "un-split" shares. However, if settlement is not until the Monday or Tuesday, the number of shares that "land" will have increased: if you bought 100 shares at $440 each, you will end up with 400 shares, each worth $110 (assuming no other change in the share price).

Answer 2

When will the new shares from the split be credited to my brokerage account?

When will the new stock price be reflected?

Let’s assume that as of the Record Date (August 24, 2020) an investor owns 100 shares of Apple common stock and that the market price of Apple stock is $400 per share, so that the investment in Apple is worth $40,000. Let’s also assume that Apple’s stock price doesn’t move up or down between the Record Date and the time the split actually takes place. Immediately after the split, the investor would own 400 shares of Apple stock, but the market price would be $100 per share instead of $400 per share. The investor’s total investment value in Apple would remain the same at $40,000 until the stock price moves up or down.

If I was interested in purchasing a share on Wednesday, August 26, would that be at the post-split value? Or would there be any other nuances to that transaction?

If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.

I didn't write that text by myself, its taken out of the offical apple investors page.

See https://investor.apple.com/faq/#StockSplit2