NVDA announces stock split! The split story I can't listen to anymore!

A stock split is when a company “divides” its shares into several parts to increase the total number of issued shares. The price per share drops due to stock splits, but there is an important characteristic that the total value of shares held by shareholders does not change.

For example, if it is a 1:2 split ratio, the number of shares held by shareholders will double. The stock price (price) per share is reduced by half, but the asset value remains the same. When stock splits are carried out, stock liquidity increases, making stock prices easy for more investors to reach.

The share split ratio depends on the company's decision, such as 1:2, 1:4, 1:10. Stock prices also fluctuate based on the split ratio.As a result of the stock split, the minimum required investment amount decreases as the stock price falls.

There are 46 companies that announced stock splits in 2024. Among them, companies with a total market value of 1 trillion yen or more are summarized below.

JR East (East Japan Railway Company)It is actually the first time in 15 years that (9020) has carried out a stock split.

The purpose is “to create an environment where investors can invest more easily by lowering the amount of stock per investment unit, and to expand the investor base.” It was announced in the company's disclosure.

When JR East shares are split on 2024/4/1, the minimum investment price will drop from about 900,000 yen to the 300,000 yen level (1:3), so it is certain that it will be easier to reach.

Even as a company, they may be conscious not only of expanding the base of investors by dividing into stock prices that are easy for individual investors to invest in, but also increasing the number of shareholders in order to meet listing standards.

Since the minimum purchase price drops as a stock split is carried out, it becomes easier to enter that stock. In particular, for individual investors using a system such as the new NISA, it is also conceivable that stocks that have been split have brought attractive investment opportunities.

As the number of issued shares increases due to stock splits, stock liquidity improves and transactions become more active. Also, announcements of stock splits often attract market interest, attract attention from investors, and can be expected to have the effect of increasing market presence. This is probably one of the reasons why companies that already have high stock prices and low liquidity, and companies that have passed a while since their IPO will split their shares.

If there is no change in the dividend amount after the stock split, the dividends that shareholders receive will also increase according to the number of shares increased due to the split. This is a substantial increase in dividends (increase in dividends) for shareholders, and is considered an advantage of stock splits.

However, stock splits do not always have only positive effects. There are also various concerns, such as stock price fluctuations due to increased liquidity, issues of reliability of companies in response to falling stock prices themselves, increases in corporate paperwork costs due to an increase in the number of shareholders, and a decline in EPS (profit per share).

Stock splits tend to be generally favored as good news, but how to accept stock splits as an investor is not always biased positively, and it is necessary to comprehensively consider the merits and demerits.

OLC (Oriental Land) (4661), which operates Tokyo Disney Resort, implemented a 1:5 stock split as of 2023/4/1. At the same time, a shareholder benefit system popular with individual investors was also reviewed, and a “system for long-term shareholders holding for 3 years or more” was newly established. Looking back on the past, OLC also carried out a stock split in 2015/4.

In the company's case, it can be seen that while trying to expand the investor base and improve liquidity through stock splits, the preferential treatment system considering long-term shareholders was reviewed, and it was realized with the aim of providing long-term value to shareholders.