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Speaker 1: Welcome to Ask Fear and Greed. Well, we answer questions

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Speaker 1: about business, investing, economics, politics, and more. I'm Michael Thompson

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Speaker 1: and hello Sean Ale.

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Speaker 2: Hello Michael.

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Speaker 1: Okay, Sean, here's a question for you. Obviously, it's called

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Speaker 1: ask for a agreed. If there wasn't a question, it

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Speaker 1: would be a very short and very dull episode. What

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Speaker 1: is the point of a stock split? And how does

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Speaker 1: it work?

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Speaker 2: Right? So, stock splits are reasonably easy. So it's when

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Speaker 2: a company splits it's one share into numerous shares. So

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Speaker 2: you might have a ten for one, a five for one.

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Speaker 2: So if a company's share price is one hundred dollars

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Speaker 2: and you have a ten for one stock split, the

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Speaker 2: share price they put ten times so many shares out there,

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Speaker 2: and each one is worth ten dollars rather than one

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Speaker 2: hundred dollars, and the value of the company doesn't change

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Speaker 2: at all, but the number of shares do. Now, why

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Speaker 2: do you do it? So it's kind of the opposite

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Speaker 2: to a share buy back kind.

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Speaker 1: But so say I own one hundred dollars in shares

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Speaker 1: in the company. I say I own one one hundred

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Speaker 1: dollars share. Now I own ten dollars shares.

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Speaker 2: That's exactly right. So a bunch of reasons stocks can

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Speaker 2: get really expensive. I mean Berkshire halfway share prices in

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Speaker 2: the tens of thousands of dollars, right, But a lot

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Speaker 2: of companies Apple's been a great example over the years.

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Speaker 2: Doesn't happen so much in Australia anymore. You want retail

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Speaker 2: investors to be buying in so if they're buying a

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Speaker 2: ten dollars share rather than one hundred dollars share, there's

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Speaker 2: just this sense that buying the I spend a thousand

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Speaker 2: bucks again buy one hundred chairs in the company is

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Speaker 2: better than just buying ten chairs. So it becomes more accessible,

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Speaker 2: more liquid, easier to sell. When the share price is less,

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Speaker 2: there is no change in value. I mentioned in Australia.

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Speaker 2: So pro Medicus, the medical imaging company in Australia, its

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Speaker 2: share price has gone through the roof. There's always talk

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Speaker 2: that that should do a share split, but really in

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Speaker 2: Australia we haven't had a huge amount of it. Some

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Speaker 2: companies over time have, like I could ever say the

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Speaker 2: words Chipotal, Chipotal shop part of the in the US,

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Speaker 2: like they did a fifty for one split, so suddenly

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Speaker 2: your one share, you get fifty shares. Wow, okay, apples

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Speaker 2: Apples split. I think it's five times in its history.

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Speaker 1: That's why it's also hard to you know, when you

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Speaker 1: occasionally want to work out, if you invested in such

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Speaker 1: and such thirty years ago, how much it's going to

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Speaker 1: be worth now, It's really hard to do that when

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Speaker 1: you have then kind of five or six or a

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Speaker 1: dozen share splits during that period to try and calculate

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Speaker 1: what the value is, because all of a sudden it

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Speaker 1: spears off in all of these different directions.

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Speaker 2: Yeah, yeah, so yeah, that's exactly right. And basically Australian

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Speaker 2: companies don't do it. I'm trying to think the last

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Speaker 2: major company to do a stock split and I can't.

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Speaker 2: Can you google that for me? Michael? You're but I mean,

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Speaker 2: I can't remember. It's much more relevant or regular in

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Speaker 2: the US. Nvidia has done it now that I think

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Speaker 2: of it. Nvidia had Well has done it recently because

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Speaker 2: his sheer price went through the roof. Well, I'm looking

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Speaker 2: at you know, have you got it?

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Speaker 1: Yes? I do, I do, I do. The CSL has

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Speaker 1: done it a long time ago.

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Speaker 2: Yes, Cochlear right as well, again a fair while ago though, yeah.

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Speaker 1: I look, you didn't say that you wanted one last week.

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Speaker 2: No, No, Australian companies don't tend to do it, and

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Speaker 2: in a way like it doesn't change the value of it.

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Speaker 2: It's just liquidity, accessibility, particularly if they're mum and Dad's stock.

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Speaker 1: Okay, that's interesting, that's vaguely interesting. Well okay, if I

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Speaker 1: had to score that out of fifty for interest, I

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Speaker 1: would say about a good forty one forty two with you.

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Speaker 1: That's not just a PhD that it certainly as an HD.

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Speaker 2: Well, no, it's a D, that's a section. Yeah, all right.

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Speaker 1: Maybe that's why we struggle to figure out that.

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Speaker 2: One thing that is really interesting is that Warren Buffett

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Speaker 2: has never allowed a stock split of Berkshire hathways A shares,

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Speaker 2: and that's why.

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Speaker 1: They're worth I don't know what the hundreds of thousands

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Speaker 1: of dollars those ones.

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Speaker 2: Yeah, yeah, yeah, And you would think that that's one

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Speaker 2: that should have because this price has just gone up

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Speaker 2: so much. Weren't we saying over the sixty years it's

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Speaker 2: like averaging twenty percent, yeah, more than ten percent.

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Speaker 1: And that's why then when you hear about his charitable

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Speaker 1: things and when you see that he's donated kind of

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Speaker 1: a thousand shares to an organization like, oh, that's not

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Speaker 1: actually so much. But when those shares are worth hundreds

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Speaker 1: of thousands of dollars each, right, it suddenly becomes an

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Speaker 1: incredible donation.

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Speaker 2: Yeah, yeah, yeah, I mean phenomenal.

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Speaker 1: All right, you know what EI think. You just bumped

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Speaker 1: that up from a forty one to a forty five

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Speaker 1: out of the interest scale.

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Speaker 2: Excellent, good, good job.

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Speaker 1: All right, thank you, Thanks Michael, And remember, if you

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Speaker 1: have your own question that you would like us to answer,

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Speaker 1: you can send it on through via at the website

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Speaker 1: Fear and Greed dot com todau, or head along to Facebook, Instagram,

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Speaker 1: LinkedIn any of the social media platforms. Send us a message,

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Speaker 1: we will get it and we will answer it. I'm

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Speaker 1: Michael Thompson and this is ask Fear and Greed