03/21/2022: Weekly Briefing
As I mentioned last week, Amazon announced a 20-for-1 stock split recently. So what does a stock split mean and how does it actually work?
Stock splits don’t affect the value of how much stock you own; it just changes the number of shares you have. It’s like taking one $20 bill and breaking it into 20 $1 dollar bills. In both scenarios, you still have $20 dollars, it’s just in a different form. So if you currently hold Amazon stock, on June 6 (when the split will go into effect if approved by shareholders) your trading account will show that you have 20x the number of shares that you had before.
Why do companies do this? It allows the company to sell shares at a more affordable price. For example, on 3/18 Amazon stock closed at $3,225.01. If today you wanted to buy a share of Amazon, it would cost $3,225.01. That can be pretty pricey!
After the 20-for-1 split, one share would cost $161.25 ($3,225.01 / 20 = $161.25). $161 makes it much more affordable for individuals to buy a share of Amazon than when the stock was $3,225.
There’s another way to get around pricey stocks. Today there are a number of platforms that allow you to buy fractional shares of a stock. For example, Warren Buffet’s Berkshire Hathaway has famously never done a stock split and has a current share price of $512,991. So you could buy $100 of Berkshire Hathaway stock for 0.0002 shares.
Another way that companies get around this pricey stock price issue is that they issue a second class of stock. In the Berkshire Hathaway case, they created a second tier of stock (called Class B shares) that trade at $342.41 (as opposed to the $512,991 per share for the class A stock). This is another way that normal people like me can buy into Berkshire Hathaway. The difference between the class A shares and the class B shares is that class B shares could have different voting rights than class A and may not be the first to get paid out in the event of a bankruptcy.
Other comments:
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Money & Crypto
Articles: I’ve heard from many of you that you’re struggling to open links to articles. Click here for articles.
NYT did an explainer on crypto this weekend that they called “The Latecomer’s Guide to Crypto”. Although I do take issue with the title as I think blockchain and digital currencies are in their infancy…so don’t worry, even if you’re starting to be interested now, you are not late to the game. (Thank you to a loyal reader for sending!) (NYT)
Creating and running a DAO (decentralid autonomous organization) (Wired)
HubSpot hack affects crypto companies like BlockFi (The Block Crypto)
3 CEO’s answer what 1 thing would make the world more equitable (Bloomberg)
Credit companies to remove certain medical debt from credit calculations (NYT)
Etc.
Ukranian TV presenter Pasha Lee killed in conflict while volunteering in armed forces
📺Drive to Survive Season 4 was soooo good
📖 I’m currently reading Titan by Ron Chernow about John D. Rockefeller’s life. It’s riveting, but also pretty long so it’ll keep me busy for a while.
Podcast Pick of the Week
🎧Former US ambassador to Ukraine Maria Yovanovitch
Disclaimer: All opinions are my own. The content on this site and on the podcast does not constitute financial, legal, accounting, tax, or investment advice.
