Nvidia Stock Splits 10-for-1

Happy Friday! In today’s email:

  • Nvidia (NVDA) announces a 10-for-1 stock split. What does that mean for your shares & why do companies do stock splits?

  • Interest Payments Are The Third Largest Expense For The US Government, Behind Social Security & Health

  • Millennial Net Worth At All Time Highs

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Nvidia announced on Wednesday a 10-for-1 stock split. What does that mean for you?

On their earnings call this past Wednesday, Nvidia announced a 10-for-1 stock split. This means for every 1 share of Nvidia you own as of June 6th, 2024 you will receive 9 more shares as of market close on June 7th, 2024. NVDA will start trading with the stock split adjusted price on June 10th, 2024.

This means if you own 1 share, you now will have 10 shares.

This means if you own 15 shares, you now will have 150 shares.

This means if you own 49 share, you now will have 490 shares.

Does this mean my shares are instantly worth 10 times more?

No. When the stock split occurs, the share price will be divided by the multiple of the split. In this case, since it is a 10-for-1 split, the share price of NVDA will be divided by 10. If NVDA is trading at $1,000 per share on the day of split, after the split occurs, it will trade at $100 per share.

This means your ownership amount will not change.

If you own 10 shares of NVDA before the split & it is trading at $1,000 per share, your current market value is $10,000.

After the split you will have 100 shares but NVDA will be trading at $100 per share, so your current market value is still $10,000.

Why do stock splits occur?

Stock splits happen for a couple reasons.

1) A stock split increases the number of shares available in the market. For example, if a company has 1,000,000 shares outstanding & they do a 2-for-1 stock split, well now there will be 2,000,000 shares outstanding. By doing this, it increases the liquidity of the stock.

2) Make the price more accessible to investors. While the emergence of fractional shares has really removed this as a reason, it is still important to note. NVDA is trading around $1,000 as I type this. Even though you can buy .05 shares, most people would prefer to own full shares. So by doing a stock split, NVDA will be trading at $100, which is a more accessible price to investors. To be clear: Just because the stock price is split from ~$1,000 to ~$100, it does not make the company less or more valuable at time of split. NVIDIA cited this exact reason for the split, saying it would make stock ownership more accessible to employees and investors.

Does this mean NVDA will go up?

A stock split does not mean a stock will go up. However, recently big tech companies that have undergone stock splits have seen an jump in share price after announcement. This year, NVDA is up 115% & the day after the stock split was announced NVDA was up 9%.

NVDA YTD

NVDA 1 Day (May 23rd, 2024)

Interest Payments Will Likely Become The Third Largest Expense For The US Government in 2024, Behind Social Security & Health

What is the takeaway? Interest on debt is expected to be the third-largest expense after Social Security and health for the US Government. This is not because any of the other programs are shrinking. Most government expenditures actually grow year to year. Interest expenses in 2024 are running 41% higher than in 2023.

Millennial Net Worth At All Time Highs

What is the takeaway? Even though inflation is elevated, those who have money in assets (real estate, stocks, crypto etc.) have seen an increase in their net worth since 2022. This is yet another reason to buy & hold assets for the long term. While I am not a millennial myself, I have also seen. my net worth grow since 2022.

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