Nvidia's 10-for-1 Stock Split Has Arrived. Here's What the future holds

News
10 June 2024

Nvidia's stock has been on a remarkable upward trajectory. Since the company’s blockbuster earnings report and the announcement of a 10-for-1 stock split last month, its stock price has hit record highs, pushing Nvidia's market capitalisation past the $3 trillion mark.

Key Details of Nvidia’s Stock Split

What is Happening?

  • Stock Split Ratio: 10-for-1

  • Record Date: Market close on Thursday

  • Distribution Date: After market close on Friday

  • First Trading Day at New Price: Monday


Impact on Shareholders

  • Shareholders will receive nine additional shares for each share they own.

  • The total value of their holdings will remain the same.

  • Example: If you hold 1 share at €1,200, after the split, you will have 10 shares at €120 each.

 Benefits of the Stock Split

Increased Accessibility

  • Lower Share Price: The split will lower Nvidia’s share price, making it more accessible to more investors.

  • Potential Increase in Demand: Lower prices can attract more investors, potentially leading to higher demand and further gains.

Historical Trends

  • Bullish Signal: Historically, companies that enact stock splits often see significant gains. According to Bank of America, these companies gain 25% within a year compared to 12% for the broader index.

 Potential Market Impact

Investor Perception

  • Affordability: Post-split, investors might see the stock as more affordable, leading to increased buying.

  • Growth Signal: A stock split can show strong company growth, encouraging investors to believe in continued success.

Index Inclusion

  • Dow Jones Industrial Average (DJIA): Lowering the stock price through the split increases Nvidia’s chances of being included in price-weighted indices like the DJIA.

  • Benefits of Inclusion: Inclusion in a major index can boost share gains by increasing visibility among investors and prompting mutual funds and ETFs to add the stock to their holdings.

Trading Nvidia Post-Split

Example: Buy (Long) Position

  • Buy position of 10 shares at a price of €1,100 on June 3.

  • Assume the closing price on June 7 is €1,200.

  • Moving profit €1,000 {(10*1,200) -(10*1,100)}.

  • The broker will close your order at a price of €1,100 (the open price of your order). Therefore, the profit or loss will be 0.

The broker will open a new order with the following parameters:

  • Buy position of 100 lots at the price of €110 (1,100/10).

  • Since the closing price on June 7 was €1,200, the opening price on June 10 will be €120 (1,200/10).

  • Your new position of 100 lots will appear in your account at a price of €110 and a current market price of €120.

  • Therefore, the total profit on your position would be €1,000 as it was before the split {(100*120) -(100*110)} = €1,000.

 

Example: Sell (Short) Position

  • Sell position of 10 lots at a price of €1,100 on June 3.

  • Assume the closing price on June 7 is €1,200.

  • Moving loss -€1,000 {(10*1,100) -(10*1,200)}

  • The broker will close your position at a price of €1,100 (the open price of your position). Therefore, the profit or loss will be 0.

The broker will open a new position with the following parameters:

  • Sell position of 100 lots at the price of €110 (1,100/10).

  • Since the closing price on June 7 was €1,200, the opening price on June 10 will be €120 (1,200/10).

  • Your new position of 100 lots will appear on your account at a price of €110 and a current market price of €120.

  • Therefore, the total loss on your position would be -€1,000 as it was before the split {(100*110) -(100*120)} = -€1,000.

Trading on the split-adjusted shares will begin when the market opens on Monday, June 10, 2024.

 

Conclusion

Nvidia’s stock split is set to make its shares more affordable, potentially increasing investor interest and driving up demand. Keep an eye on Nvidia as it continues to lead the AI revolution, and consider how the stock split might affect your investment strategy.

For any additional support or information, feel free to reach out to our support team at [email protected] . Happy trading!