After the buzz of a possible stock-split announcement from Apple (NASDAQ:AAPL) at its annual shareholders meeting on Wednesday gathered momentum, the company’s share price saw a big jump. On Tuesday afternoon, shares recovered 1.6 percent after having touched $437.66 intraday to close at $449.80.
Oracle Investment Research analyst Laurence Isaac Balter immediately picked up on the idea, which was first mentioned by hedge fund manager Doug Kass in a tweet. Isaac Balter wrote in a research note that a stock split was a much better plan than the preferred stock option currently being promoted by Greenlight Capital’s David Einhorn.
“With all due respect to Mr. Einhorn, I do not see how bleeding Apple’s cash flow to support anyone but those domiciled in the Cayman Islands with a tax-free dividend into perpetuity (and a 10 percent tax equivalent yield) [works],” Isaac Balter wrote. And while Apple was certainly still cheap, the “average American retail investor doesn’t buy P/E ratios”, he added. “They buy (or sell) share price action.”
A better idea would be to offer a 10-for-1 stock split, which would also give shareholders, and consequently shares, a psychological lift…