Brokers question hype around Apple and Tesla making their shares more accessible

Analysts have questioned the need for stock-splits.

Shares of Apple and Tesla will be less costly on Monday as pre-announced stock splits take effect, in theory making them more accessible to retail investors, but as more brokers offer fractional shares, some in the market question the need.

Investors cheered the Apple and Tesla announcements, helping extend a rally in the companies’ shares, which along with many other technology firms, have soared in value as the market emerged from its pandemic-induced depths in March.

That made owning a piece of these companies seem out of reach of many investors. Apple closed at over $500 a share earlier this week, while Tesla continued its meteoric rise to above $2,200 a share.

Both Apple and Tesla said their actions, a 4-1 and 5-1 split respectively, would let more investors access their shares.

But in the past year, online brokerages like Robinhood, Charles Schwab and Fidelity, along with several smaller shops, have begun offering slices of individual shares.

“Fractional share ownership, all else equal, really does render the price of a stock irrelevant,” said Julian Emanuel, chief equity and derivatives strategist at BTIG.

That, combined with commission-free trading at most brokerages, has made it easier for anyone with a mobile device to own a piece of a company.

“People my age grew up with technology and we like to invest in technology-related companies, like Tesla and Amazon and Google, and if it weren’t for fractional shares we wouldn’t really be able to take advantage of that,” said Jaidan Craig, a support technician.

Mr Craig, aged 23, said he has been investing for two or three years, first on Robinhood, which lets people invest as little as $1 in any listed company, and then moved to a broker called M1, which emphasises diversifying your investments. He said that without fractional investing, he could not have built as well-rounded a portfolio.

While fractional shares have been used for years by mutual funds, they have not as been widely available for stocks until recently, and not every brokerage offers them, helping maintain the appeal of stock splits on some platforms.

TD Ameritrade, an online trading pioneer that is being bought by rival Schwab for $26bn, does not offer fractional shares, but said it is looking at them.

It noted that in past years, when companies, such as Apple, Google, Mastercard and Visa split their shares, retail trading volumes tripled.

“We have historically seen that our retail investors use stock splits as trading opportunities, accessing popular names that may have gotten too expensive pre-split,” said JJ Kinnahan, TD Ameritrade’s chief market analyst.

Robinhood said that while from a psychological perspective, a stock trading in the thousands appears much more prohibitive perceptions are shifting.

“As fractional shares trading becomes more popular at retail brokerages, the importance and need for stock splits diminish,” it said.