Stock Splits: In Whose Interest?
Stock split has been quite a popular strategy used by the companies for quite some time now. Several Indian as well as global companies have resorted to stock splits in the past many a times. While the objectives of the stock splits have been clear, the same cannot be said of timing and effects of stock splits. And also, it is rather difficult to point out which kind of companies/companies from industries should go for stock splits. In the backdrop of two global companies – Apple and Google – and an Indian company -Axis Bank - this caselet can be used to analyse the probable timing and the effects of stock splits.
Prerequisite Conceptual Understanding
The participants of this caselet are expected to have working knowledge of the following for an effective classroom discussion:
- • The classification of shares
- • The organisational and governance implications on each class of shares
Expected Learning Outcomes
At the end of this caselet, the participants are expected to have working knowledge of the following:
- • The concept and connotation of stock splits
- • The causes and effects of stock splits
- • Analysis of timing pattern of stock splits
Positioning and Setting
This caselet can be used for any of the following modules/courses:
- • Financial Statement Analysis module/course – To understand the implications of corporate events
- • Valuation of Securities module in Financial Management/Corporate Finance course – To understand how the valuation of equity shares would differ when a company resorts to stock splits
- I. What are stock splits? What is the difference between a stock split and a reverse stock split? What is the difference between a stock split and a bonus issue?
- II. Why do companies go in for stock splits? When do you think companies can go for stock splits?
- III. ...............
Suggested Discussion Dashboard
The caselet entails an interesting discussion on the concept and organizational implications of stock splits. This discussion can be carried out under two sections given below. It should also be noted that each of the section’s discussion was centred around an anchor point.....................