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Two Stock Split

Sep 14, 2017 in Business

Question 1:

Apple Inc. has performed several splits on specific dates. In this case, two stock splits were in 2005 that and 2000 having specific record dates, split dates as well as EX dates. The company engaged in stock split in order to expand the shareholder base (Winograd 2). It was also to result to smaller investors that were likely to lead to a shortage of stock or bring trading options (Winograd, 3). It could also lead to more rational trading in case the larger institutions held smaller percentages of the entire stocks. During this time, the company required to boost its publicity that it has already done today (Winograd, 13).  A more arguable reason would be that an entire study was carried out for the company’s stocks that slit from anywhere from 2 for 1, to 4 for 1 in the years 1990 to 1997 while using the companies whose stock failed to split as the control group. Finally, the results indicated that for every year, split stocks increased in the control group by an 8% while in the following 3 years, the same number rose to 12% (Winograd, 6).  The company required that its outstanding shares should double. The earnings per share could be half of what they could have been since they are divided by twice as most shares (Yahoo Finance 2).

The two stock splits have a market impact as well. This is because after each split, every share becomes worth half of its previous worth prior to a split. Splitting the stock will raise the stockholder base (Gitman and McDaniel, 11).  More shares will be acquired but there will always be some outstanding ones in the mark. For example, it can be assumed that on the record date, 2005 there was an investor who owned 100 shares from the company’s common stock (Gitman and McDaniel 12). It can also be assumed that market price per share of common stock was $80 per share. Therefore, the investor’s worth was $ 8,000. Another assumption is that the stock price does not rise or fall between a record date and a time when the split occurred. After a split, 200 shares would be owned by the investor while the market price is likely to fall to $40 for each share. However, the investment remains at $8,000 until a time when the stock rises or falls (Gitman and McDaniel 224).

Question 2:

Apple Inc. Acquires Anobit Technologies Ltd.

Apple bought the flash memory controller startup known as Anobit Technologies Ltd. The company was acquired for $390 million. The whole deal was signed on January 6, 2011 and a sum that was below that was sought by Anobit since it had been reported as between $ 400 million and $ 500 million. Apple has become one of the largest purchasers of NAND flash memory in the world. Apple acquires approximately 23% of Anobit’s supplies in the world. Negotiations between the two companies lasted for two weeks after a newspaper made reports on 20th, December 2011 that Apple acquired Anobit for $ 500 million (Solomon & Ferziger,03). Finally, Apple signed the entire agreement on January 6, 2012. This was information provided by two shareholders although the company wanted no issues disclosed.  The acquisition was to be effective by 10 January 2012 (Winograd, 14).

This acquisition was to be the largest for Apple after it had acquired NeXT computer in the year 1997 for $ 404 million. This brought Steve Jobs back to the company. The entire process of acquiring Anobit might have minimal influences on the price of Apple’s shares because the company has more than $80 billion cash as well as the near term investments (Solomon,& Ferziger, 07).  However, Apple gained much from the acquisition since it was able to own and control the innovative technology of Anobit that it already uses. Before the acquisition, the share price in the company was $US 700 while after the acquisition, it broke to $US400. Apple is now able to use the flash drive performers to increase flash memory as well as improve the entire performances for its devices. The spokesperson to the deal was Alan Hely. The entire deal enables Apple to acquire supplies of key components that are used to optimize the memory abilities in its products like the iPhone and the iPad.  The deal appears successful for the acquirer, Apple, since the company is now able to acquire the supplies from Anobit at negotiable prices. The employees also benefit from the expansion of the company (Gitman and McDaniel, 233).

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