Recently, American technology giants have set off a wave of "stock split craze".

Yesterday, Tesla, Inc. announced the stock split and plans to discuss and approve the proposal to split one share into three shares at the shareholders' meeting in early August for the first time in two years.

Amazon.Com Inc's stock split plan for the first time since 1999 came into effect on Tuesday, and the share price is in triple digits again.

According to media reports, in addition to Amazon.Com Inc and Tesla, Inc., Alphabet Inc-CL C's parent company Alphabet, cross-border e-commerce company Shopify Inc, Nintendo and GameStop are all likely to be split this year.

Stock splits are not uncommon. Over the years, many listed companies have split their shares. Berkshire Hathaway, managed by Buffett, split Class B shares by 50% in 2010. Apple Inc has split five times since his initial public offering in 1980. Although the split ratios of these companies vary, there must be some reasons why there are so many multibillion-dollar companies breaking up.

How to dismantle it?

Let's first learn how to split the stock. Take Amazon.Com Inc as an example. Shareholders who hold Amazon.Com Inc's shares on May 27 will receive an additional 19 shares for each share they hold on June 3.This will not cost existing shareholders any price, and the value of their holdings will not be changed by the split.

Therefore, if Amazon.Com Inc's share price is at $2500 a share before the split, the shareholders who hold three shares will own 60 shares after the split date, but their total investment will still be around $7500 (assuming the share price does not plummet or soar).

The only difference is that the price of Amazon.Com Inc's stock will fall sharply. In this case, the share price will fall from $2500 to $125a share. For many investors, it's just that the numbers shown on your stock app are slightly different.

Why open it?

The stock split seems meaningless, although different numbers are displayed, but the company still operates as before, the market capitalization remains the same, and the value of the shares held by shareholders remains the same, so why do they do so?

There are many reasons, most of which are attributed to the psychology of investors.. As share prices rise, buying stocks becomes unbearable. A share price of $1 means that $2500 can buy thousands of shares, while a share price of $2500 means you can buy only one.

The problem goes beyond the perception of more moderate investors in the portfolio. For those with a principal of $10, 000, buying a share of Amazon.Com Inc at the previous price means investing 25 per cent of the portfolio in a company with a high degree of concentration and cannot be diversified.

Secondly, split shares help to improve the liquidity of stocks.It's easier to buy or sell. Amazon.Com Inc said in the document that the move would make it easier for his employees to manage his shares in Amazon.Com Inc. Previously, if they wanted $1000 in cash, they needed to sell all their shares and reinvest the rest. After the split, they sell fewer shares and get the $1000 they need.

More importantly, split shares tend to go up with share prices.It will be easier for more investors to buy stocks, which may increase demand and thus raise prices.

In essence, the split will not really change anything, and the fundamentals of the company will remain the same. Nonetheless, since 1980, companies that split shares have outperformed the s & p 500 by 16.3% in the 12 months after the split took effect.

This is a good example of correlation, but it doesn't mean there is cause and effect. In fact, split shares will almost certainly not make them outperform the market average. One of the prerequisites for the sharp rise in the share price of the split company isThese companies have been doing well and may have overtaken the S & P 500 before the break-up.

Why open it now?

Why is there an upsurge of stock splitting now? Or take Amazon.Com Inc as an example, Amazon.Com Inc now split shares also has an additional advantage. Us technology stocks have suffered heavy losses so far in 2022, with Amazon.Com Inc shares down nearly 30 per cent so far this year. The share prices of companies such as Apple Inc, Netflix, Meta and Microsoft Corp have all been similarly hit.

It is clear that this is going to be a tough year for a company that hovered around the $3250 mark in 2021 during the stock price downturn, and a stock split can change that.

For example, when the share price is $125 after the split, the background and price correlation disappears.Again, it's about psychological perception.

What does it mean for investors?

What does stock split mean to ordinary investors?The most direct thing is that you can afford it.You no longer have to co-buy stocks with others.

But it also means that it is unlikely to have the same shareholder rights, such as the right to vote on corporate decisions.. This may not be a big deal for most investors, but it may be important if you want to have a say in new initiatives such as sustainable business practices.