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However, as brokerages increasingly allow customers to buy parts of shares, the benefit of share splits appears to have diluted over time.Īpple (AAPL.O) split its stock 4-for-1, while electric carmaker Tesla (TSLA.O) split its stock 5-for-1 last year, with both companies saying they aimed to make their shares more affordable to individual investors. Stock splits can potentially attract retail investors who make small trades. The company's stock, which was last up at over $600 in premarket trading, has gained nearly 12% this year after its value more than doubled in 2020. And there's no functional difference between buying 1/4 of a share pre-split or waiting until after the split and buying a full share for the same cost.May 21 (Reuters) - Nvidia Corp (NVDA.O) on Friday announced a four-for-one stock split as it looks to make its stock less expensive for investors, sending the chipmaker's shares up 3%. Those investors could have already bought Nvidia anyway, regardless of the split. That means someone with $200 could purchase 1/4 of a share today if they wanted.īecause fractional shares put expensive stocks within reach of any investor, a split shouldn't open up a new customer base of people with lower account balances. Instead, brokers that allow fractional shares make it possible for any investor - even those with a few dollars - to specify how much they want to invest. Someone with only $200 no longer needs to wait for Nvidia to split in order to buy a stake in the company. See, fractional shares allow anyone to buy fractions of shares, or partial shares, even if they don't have enough investment capital to purchase a full share. However, thanks to fractional shares, it's becoming less and less likely that a split will have even this effect. Still, the reduction in the per-share price can sometimes have a short-term impact on the stock price due to the company's shares seeming more accessible. Some investors also perceive a stock that costs $200 per share as being "cheaper" than one that costs $800, even though that's not a good way of assessing whether a company's shares are worth their price. Now, companies sometimes split their shares in hopes of driving up demand since more people can theoretically afford to buy shares that cost $200 each instead of $800. Fractional shares reduce the impact of stock splits