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Will Microsoft Stock Split in 2024?
No, Microsoft has not made an official announcement about splitting its stock in 2024 so far.
However, speculation is rife among investors that a Microsoft stock split 2024 edition could still happen, especially given the perhaps unnatural tendency for the price of popular stocks, including Nvidia (NVDA), to rise on news of a split in recent history.
Below, we break down whether the Microsoft stock split rumors could turn out to be true or false and what it might mean for MSFT shares.
Key Takeaways
- Microsoft has not officially announced a stock split in 2024, but speculation is growing due to the stock’s high price.
- Historically, Microsoft has split its stock nine times, with the last split occurring in 2003.
- High stock prices can attract long-term investors, and Microsoft’s leadership may favor stability over frequent splits.
- Stock splits lower the share price but don’t change a company’s value, making shares more accessible without affecting fundamentals.
- Microsoft could eventually split its stock again, though there are no immediate plans or comments from executives.
- Excitement around stock splits may drive short-term price changes, but they don’t impact long-term investment strategies.
Why Doesn’t Microsoft Split Its Stock?
The company’s management might be happy with where the MSFT share price is right now, but, of course, we don’t know that, nor do we know the official reason Microsoft has not already split its stock this year.
As of September 6, 2024, Microsoft stock is trading at over $400 per share following a massive rally and reasserted market confidence in the company.
The rapid expansion of its cloud services since Satya Nadella took over as CEO, particularly through Azure, along with significant advancements in artificial intelligence (AI) and its partnership with OpenAI (that runs ChatGPT), has been a key driver of this growth.
So many are questioning why Microsoft has not split its stock since its new high-growth cloud/AI era began.
A stock split, which has the effect of lowering the share price to a more affordable level, in theory, can widen the possible investor base and increase demand for the shares.
However, there are a number of compelling reasons that justify the decision of the Microsoft Board of Directors not to call for a stock split.
Potential Reasons to Avoid a Stock Split
- High stock prices can attract long-term, serious investors rather than short-term traders. This can help create a more stable shareholder base, reducing volatility in the stock price.
- The counterargument to a small price being appealing because the price is low is that a high stock price can be perceived as a sign of a strong, successful company. As such, a high price can create an aura of exclusivity, making the stock appealing to institutional investors or high-net-worth individuals.
- With a higher share price, fewer shares are traded, which can simplify administrative tasks like voting and shareholder communication. This is usually more relevant for companies with a large number of retail investors, like GameStop, rather than mega-cap stocks like Microsoft, which have large institutional ownership.
- The decision to split or not often comes down to the philosophy of the company’s leadership. Warren Buffett, who happens to be good friends with Microsoft co-founder Bill Gates, has famously resisted stock splits.
- Certain stock indices, like the Dow Jones Industrial Average, in which Microsoft is indeed included, are price-weighted. Companies in such indices might avoid splits to maintain or increase their weight in the index.
What Does This Mean for Investors?
The Microsoft share price closed at $408.39 on September 5, 2024. For the sake of a simple example, let’s say the Microsoft stock price before the split is priced at $400 exactly.
- A 2-for-1 stock split would result in Microsoft shares being priced at $200 each.
- A 4-for-1 stock split would result in Microsoft shares being priced at $100 each.
- A 10-for-1 stock split would see MSFT shares priced at $40 each.
As this example demonstrates, a stock split is purely cosmetic and does not affect the fundamentals of the company doing the split, nor does it affect the value held by shareholders; it simply affects the number of outstanding shares and the price per share.
Microsoft Stock Split History
The Microsoft stock split history is long and storied. However, the company has not split its stock in decades, and many would argue it is long overdue.
Microsoft’s last stock split was a 2-for-1 in 2003, and before that, it did eight others, but they were all in the late eighties or nineties.
How Many Times Has Microsoft Stock Split?
Microsoft has split its stock a total of nine times. These went across on the following dates with said ratios for the split:
Will Microsoft Ever Split Its Stock Again?
Yes, there appears to be a quiet consensus that Microsoft will split its stock again, just not anytime soon.
The logic is that Microsoft likely doesn’t see a stock split as a priority and will delay the process until higher prices, a bit like Amazon before its split in June 2022.
Very little to nothing has been openly spoken about the possibility of a stock split, with company executives unable to comment until it’s officially announced and most analysts preferring not to make a Microsoft stock split prediction on what is essentially a binary outcome without inside knowledge of the situation.
Top 5 Tech Stocks With Frequent Stock Splits
Apple (AAPL), Nvidia (NVDA), Cisco (CSCO), Intel (INTC), and Qualcomm (QCOM) are top tech companies known for frequently splitting their stocks to keep share prices affordable and attract a broad range of investors.
Apple (AAPL), for instance, has split its stock five times, with the latest being a 4-for-1 split in 2020.
What Is a Stock Split?
A stock split is a corporate action where a company increases the number of its outstanding shares, typically to enhance liquidity.
In a forward split, while the price per share decreases, the overall value of the company remains unchanged.
For example, in a 2-for-1 stock split, an investor with 100 shares at $50 each would, after the split, hold 200 shares at $25 each, with the total value of the investment still at $5,000.
Why Are They Important to Investors?
The short-term impact of a stock split can be a bit of a wild card, often leading to unpredictable swings in stock prices as traders react. While splits don’t change a company’s actual value, they can stir up speculative behavior, causing temporary volatility.
This makes it risky to base investment decisions solely on a stock split, as it doesn’t reflect any real change in the company’s fundamentals.
The Bottom Line
Microsoft has not officially announced any plans for a stock split but that probably won’t dampen speculation that it could be just around the corner.
Just bear in mind that the excitement around a split might sometimes boost the share price in the short term, but it’s not a solid foundation for long-term investment strategies.
FAQs
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References
- Stock Splits Calendar – Yahoo Finance (Finance.yahoo)
