Netflix will begin trading at the post-split price on July 15.
Shares of Netflix closed Tuesday’s regular trading session up almost 1 percent to $681.19.
After the split, the company anticipates the price will drop to about $100 per share. Although stock splits do not technically change the value of the stock, companies often utilize these splits to make shares more affordable for smaller investors. Forbes reported that the announcements came when the company’ stock gains escalated to 182% over the past year, declaring it to be the fourth highest stock price and the stock price saw an increase of 2.6 percent from 0.9 percent as a result.
Netflix said the stock split will take the form of a stock dividend and occur on July 14. “Retail investors will likely find the split-adjusted price more palatable”.
Netflix shares have climbed to record highs in the past three months, particularly on investor enthusiasm about the company’s worldwide expansion plans. Fourteen multinational giants that included Google and Apple followed a similar stock split. BTIG Research’s price target indicates a potential upside of 40.76% from the stock’s previous close. Some academic research has also suggested that stock splits might indicate some degree of faith by management in the stability of the stock. Even Buffett split Berkshire Hathaway’s lower-priced B shares in a 50-for-1 deal in 2010 to help finance the $27 billion buyout of Burlington Northern Santa Fe.
Further, despite traditional media and entertainment companies accelerating their shift into OTT, they are still “ill-prepared to make the transition” for a number of reasons, including lacking the technical expertise to shift their networks to direct-to-consumer models.
Licensing content is another big factor, with costs continuing to rise for Netflix-it already spends billions of dollars per year on third-party content licensing. It ended the first quarter with 62 million subscribers.