After Nvidia announced its 10-for-1stock split last week, CNBC's Jim Cramer explained why moves like these can give companies a boost.
After Nvidia announced its 10-for-1stock split last week, CNBC's Jim Cramer explained why moves like these can give companies a boost.
A stock split doesn't materially change the value of an investment, it just means that a company is dividing its shares so that each individual share is cheaper. "In theory, stock splits, they shouldn't matter at all," he said. "But if you just look at the stock splits that've been announced…they clearly don't hurt."its shares so that each individual share is cheaper. For example, Nvidia closed Tuesday at $1,139.01. With a 10-for-1 split based on that price, each share would be worth $113.90. And an investor who owned one share of Nvidia before the split would now own 10.
Cramer explained that companies usually split stock to make shares with "terrifying price-tags" more available to regular investors. Even though trading in fractional shares is possible, Cramer said it can feel better for many to be able to own full ones. Nvidia said in aWhile Cramer stressed that stock spits don't guarantee gains, he said a company's shares often do rise after such an announcement.
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