We can either talk about stock, splits, infractions and math, or we can talk about them in pizza. Your pick, so you've probably heard that tech giants like amazon and google are having a split. No, not that kind of split nor this kind. They are having a stock split, a stock split.

What's that in this video, we'll be discussing what is a stock split and we'll do that, while we eat some delicious pizzas together, we'll also talk about how a stock split affects some familiar stocks such as tesla apple and pretty soon, google and amazon, and, of course, How can we, the retail investors and traders, take advantage of this opportunity and make some money in the stock market? So if you want to learn about all these different kinds of splits in this video and eat, some pizza then remember to drop a like at the bottom of the video. So what is a stock split? You ask the fancy way of saying it is that a stock split is when a company increases the number of shares available and, as a result, lowers the price of the stock or visually speaking a not so fancy way of explaining. It is that a company takes their stock and cuts it into smaller pieces. This is an event that has to be voted and agreed upon by the publicly traded company.

Usually the ceo or the cfo proposes that the company stock be cut into smaller pieces and that's called a stock split ratio. Then the company's board of directors have to vote on the decision. Recent examples of this are tesla's 5-1 split back in 2020 and now amazon and google, with their announcement to split shares 24 41 in february and march. This decision is often made when the stock price has increased substantially.

As you can see from this amazon stock chart, amazon was once trading at around 15 after the dot-com bubble more than 20 years ago. Since then, the company has grown tremendously under the jeff bezos leadership. Online shopping becomes more popular and amazon banks, billions of dollars of revenue per year, as they swallow up market shares in other industries such as groceries, physical bookstores, consumer stables, pharmacy and alexa. Listening to our most intimate secrets at home.

Yes, basically, amazon is slowly taking over the entire world. The stock price took off like a rocket from double digits to triple then broke through thousands in the last couple of years to a high of thirty seven hundred dollars, and you can see it's a similar scenario for stocks at google. All these share prices have gone up exponentially and are seemingly too expensive. Now, if we take a look at apple share prices without the previous four stock splits, the stock will be at eighteen hundred dollars.

Today, as for tesla, it will be around four thousand dollars, and i remember when we all thought 420 was going to be the peak on this monster. So basically expensive companies like amazon want to split their stock as much as possible, because that means everyone becomes insanely. Rich overnight and they deliver lambo to your door the next day right. Well, not exactly, in fact, when a company splits a stock, technically, nothing happens, and that's because of this thing in math called fractions.

Okay, i don't think i'm the best math teacher here, believe it or not. Not all asians are good at math. I guess it's not bad, because all i have to tell you is that to find the least common denominator after you convert all integers and mixed numbers into fractions then find the lowest common multiple of the denominators before you can blah blah blah blah blah boring. Let me introduce you to our special segment for this video cooking with shea and by cooking i mean just taking a frozen pizza out of the freezer, throwing it into a toaster, oven and hope for the best.

That's the only kind of cooking i can do without setting the kitchen on fire and if you haven't hit the like button. Yet please remember to drop a like at the bottom of this video, i'm literally risking setting my kitchen on fire for your learning and entertainment. I promise i'll share this piece of pizza with you by the way this is my favorite frozen pizza from walmart, not sponsored its thin crust is really good. Three dollars and fifty cents, canadian, for each box, check them out bar store sports will give them a 15 out of ten okay.

Yes, we're still talking about stock splits here so bear with me. I made this pizza because you hate fractions and we love pizza, so win win. Now. If i cut this pizza in two for you do you magically have two pizzas, of course not i wish, then we could have eaten this for breakfast lunch and dinner.

You still have one whole pizza just into two halves in a stock market. We would call this two for one split and if i cut this into four pieces, that would be called four four one split. And finally, if i attempt to do it like amazon trying to cut this pizza into 20 pieces, then we would have a 24 1 splits here and i guess i'm not eating lunch anymore. In all these scenarios, you - and i did not get any more pizza - it's just that the pizza is cut into smaller slices.

Think of this, as if you own a portion of the pizza pie, the company is simply splitting your portion into smaller slices, but your percentage ownership remains the same. So, ladies and gentlemen, boys and girls. This is exactly what happens with a stock split you get to eat pizza, i mean you still have the same amount of ownership, but in a higher number of pieces, but just in smaller slices. Now that you understand what stock split is and know what my favorite cheap frozen pizza is, the next thing you should know is that there are two common types of stock.

Splits first is a split that is insanely, sweet and delicious. Second, is the splits i'm still working on and could get quite painful, okay just kidding. No one asked for that. The first type of stock split is a regular stock split, which is often referred to as forward stock split.

The second type is a reverse split. The second type of split is less common and we usually only see these in small cap or micro crap micro cap companies. It's called a reverse split because, instead of cutting a pizza into smaller pieces now the pieces are actually bigger. The number of pieces become less, but the investors ownership remain the same.

This is something we see in many low float, penny stocks with terrible fundamentals. Let's come back to the more common stock. Splits now forward. Split forward split is the most common kind we see on expensive stocks like tesla, apple, amazon or google, for example, a 24 1 split like what amazon is doing means the company is splitting the current number of outstanding shares into 20 pieces.

So the amount of outstanding shares for amazon would increase from 500 million to 10 billion, and if amazon is trading at 2500 dollars at close on the day before the scheduled stock split, then the new price, the next day, will be 2500 divided by 20, equals 125 Dollars remember the pizza demonstration earlier you better remember, because i almost set the house on fire. A stock split does not affect the valuation or anything else fundamental about the company at all. It simply decreases the price of the stock, making it cheaper and more accessible for investors and increasing the total outstanding shares. At this point, you must be wondering: okay, if a forward stock splits really doesn't do anything to a company's valuation.

Then what's the point: why is wall street and all the stock market investors so hyped up about this 20 to 1 split that amazon and google are doing in the summer? Well, there are definitely some advantages and opportunities for us investors and traders to profit. First is simply the perceived discount in the stock price after the 24 1 splits, the amazon or google would do this summer. The stock prices will go down from around 2500 to 125.. Of course, i'll depend on the actual stock price.

This summer. Remember not every investor could afford to buy one whole share of amazon or google at 2500. Therefore, the company's intention is to make the stock more accessible to a larger number of retail investors because of the lowered price, and hopefully the stock value will eventually increase as well due to the new pool of investments drawn to the company. The second advantage of a forward stock split is the boost in liquidity.

Remember we said that the stock splits increase the number of shares but decrease the share price by having higher number of shares, it also becomes easier for existing shareholders to purchase even more stock. The third advantage of a stock split is really a result of the previous two many times we do see the stock split, leading to an increase in higher share prices overall and an increase in companies valuation. Yes, while i did say, stock splits does not directly increase the company's value. It does sometimes cost the stock price to run because of the influx of new buyers, causing the price to increase as more people purchase the stock and invest money into the company.

Looking at the tesla stock chart here, you can see the stock moved up, starting from the date of the stock split announcements on august 11, 2020, leading to the actual date. The five to one stock split took effect. On august 31st, the stock had almost increased by 70 percent short term. During that two to three week, time frame and long term, the stock had continued rallying higher to all-time highs.

Around october 2021., you can see it's a similar price action on apple stock as well. Following their previous five stock, splits with the most recent one in august of 2020., so how do we, traders and investors can profit from these stock splits like we mentioned in the short term, these stock split events could actually be good swing. Trade candidate, as we've seen stocks rally into the forward split event in 2020. However, that would only be viable in an extremely strong bull market.

In 2020 and 2021, i actually participated in a tesla stock split swing trade two years ago and in a current on certain market environment in march 2022, i would refrain from doing the same long swing trade again. However, speaking as an investor now, companies that issue forward stock splits are generally a sign that the business is doing well, especially when the company pairs. This news with additional share buybacks like what amazon and google are doing. So if you've been considering investing in these tech giants after a stock, split can be a good time to do so because again, you could now potentially own a whole share of this stock at lowered prices.

I'm actually a google stock shareholder myself and with this recent announcement, i'm actually even more bullish on the future growth of this company and i'm actually really excited to be adding this investment during the recent 2022 correction. I won't be day trading or swing trading. These stocks, i intend on holding this investment for the long term growth, so hopefully you guys learned a thing or two about stock splits and its effect on the company's share prices. For me, i really did enjoy this delicious 3.50 frozen pizza.

If you found this video helpful or just found cooking with shay the segment really entertaining, please remember to drop a like, so i can buy even more frozen pizzas. Let me know in the comment section below if you will be investing in amazon or google after the stock splits or if you simply want to see more cooking with shave videos. Thank you guys so much for watching. As always, i'm the humble trader and i'll see you guys next time.