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Why Apple Keeps Splitting Its Shares While Its Rivals Don't

Stock splits make expensive stocks more accessible to retail investors, yet they are increasingly rare among the tech giants.

Apple is doing something no other mega-cap tech stock has done in recent years: splitting its stock. 

The iPhone giant announced the move in its third-quarter earnings report, saying that its stock will be split four ways as of August 31. That means investors can buy one Apple  (AAPL) - Get Report share, which were worth $425 apiece as of Friday, for a little over $100 a pop depending on how the stock performs between now and then. 

"It's a really interesting move, no doubt," said Pierce Crosby, general manager of TradingView, a social network for traders. "As Apple approaches $2 trillion in market value, a stock split doesn't have value in itself, but it plays into the behavioral psychology of retail investors. If a trader wakes up and sees a price that's now 1/4th of what it was on the previous trading day, some will buy it out of natural instinct."

Stock analysts reacted positively to the news, remarking that the move will open up more liquidity in shares and potentially broaden Apple's investor base. Apple said on its third quarter earnings call that the split is intended to make its stock, which has more than quadrupled in value since Apple's last split in 2014, more "accessible" to more investors. 

Stock splits also signal to investors that a stock has done well, warranting the split. That can have positive effects for the stock's momentum as well, added Anthony Denier, CEO of the trading platform Webull. 

"This tells investors that the stock has done well...this usually results in increased demand, which should lift the share's price. And that is where shareholders receive the biggest benefit," he said. 

Including the latest announcement, Apple has split its stock a total of five times since it went public in 1980. It split on a 2-for-1 basis in 1987, 2000 and 2005, and then again on a seven-to-one basis in June 2014. 

Meanwhile, some of Apple's large cap peers haven't split their stock nearly as often, despite seeing comparable gains in their valuations over the past couple of decades. 

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Only Microsoft  (MSFT) - Get Report, which went public in 1986, has split more often than Apple among the tech giants. Facebook  (FB) - Get Report, which went public in 2014, has never split its stock. Google  (GOOGL) - Get Report has split its stock once, in 2014. Amazon  (AMZN) - Get Report, meanwhile, split its stock four times in rapid succession in 1998 and 1999, but hasn't done so again since -- even though the price of its individual shares is by far the highest of the group, at $3,164.68 as of Friday. 

Asked about the possibility of a stock split at a shareholder meeting last year, Amazon CEO Jeff Bezos said that it "[doesn't] have any plans to do this at this point." 

"Amazon's not worried about retail investor interest," added Crosby. "If you know there's demand - even at $3,000 - you don't need to cut price. This tells you that Apple might be concerned about overall retail interest, or they may be interested in giving shares away to their customers. i.e. buy a new iPhone, get one share of Apple.”

Most trading brokerages also allow retail investors to purchase fractional shares, so splitting to a lower price per share isn't necessary to attract greater retail interest -- but it certainly helps. The lower stock price also makes it more accessible to Apple employees who receive stock-based compensation, in addition to rank-and-file investors who take smaller positions.

Another potential side effect of the Apple split? Its stock will have a more muted impact on the Dow Jones Industrial Average, added Vincent Ning of investment management firm Titan. 

"The one thing that's unique about Apple is that it's one of the thirty component stocks in the DJIA, which unlike many other market indices, is actually impacted by price levels," he explained. Apple currently occupies the most influential position in the Dow index. 

"After the split, this top spot would most likely be ceded to either UnitedHealth or Home Depot, which obviously would change how that index moves," he added. "Across the FANGMAN [Facebook, Apple, Nvidia, Google, Microsoft, Amazon and Netflix] stocks, Microsoft is the only other name that impacts the Dow, so a potential future split there may also drive additional changes to how that index moves."

Apple shares closed 10.8% higher on Friday at $425.04.