Google’s shares just got a lot cheaper for average investors
New York
CNN Business
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A share of Google’s parent company Alphabet is suddenly much cheaper for Main Street investors – after a massive share split that took effect on Monday.
Alphabet (GOOGL) split its two stock classes (GOOG) by a 20-to-1 margin, a move that reduced the price of one stock from just over $ 2,200 on Friday to around $ 110 on Monday.
The share division does not change Alphabet’s market value. The company is still worth nearly $ 1.5 trillion, making it one of the most valuable companies on the planet.
But sharing has two potential benefits. First, it can make Alphabet stocks more tempting for ordinary investors. Second, it increases the odds that Alphabet may eventually be added to the prestigious Dow Jones Industrial Average.
This is because the Dow, which shows only 30 stocks, is weighted by price – unlike the S&P 500 and many other indices that weight by market value. So if the Dow were to include a stock with a super-high price, it would skew the index’s daily performance sharply.
Insurance company UnitedHealth (UNH), which trades at more than $ 525 per share, currently has the highest weighting in the Dow, accounting for about 11% of the average. Meanwhile, Apple (AAPL) is the 13th largest Dow component, despite having a market value of $ 2.4 trillion, almost five times as large as UnitedHealth (UNH).
Apple was added to the Dow in 2015, but only after a share split in 2014 did the share price decrease.
The list of Dow components is the subject of some discussion. Although Dow includes Apple, Microsoft (MSFT) and business software giants Salesforce (CRM) and IBM (IBM), some critics believe that the hundred-year-old market barometer still needs a further renewal for the 21st century. That could mean adding Alphabet as well as Amazon (AMZN), another market giant that recently split the stock 20 to 1.
Amazon (AMZN) is now trading at around $ 115 per share, down from pre-split levels above $ 2,000. But the company is still worth around $ 1.2 trillion, almost double the total market value of retail giants Walmart (WMT) and Home Depot (HD), both of which are in the Dow.
Several other high-profile companies have also recently announced intentions to share their shares, including Tesla (TSLA) and meme favorite GameStop (GME). This could lead to more interest from average investors, especially those looking for momentum games on social media like Reddit.
