It seems that even a big company such as Alphabet can't beat the bear power of the US markets. During the Monday session, Alphabet shares dropped by 2.5% after a stock split of 20-1. This stock split reduced the Alphabet stock price from $2000+ to within the $100 range.
For the week, the total drop in Alphabet was around 3%, but if we look at the Nasdaq 100 index, the overall drop was around 20% ever since the split.
In fact, none of the top 4 tech companies that went through a stock split had any meaningful appreciation in their stock prices. For example, Amazon dropped by 12% after the stock split in the month of March.
Similarly, Shopify, which is a leading e-commerce company, fell by 38%, and the Fortinet (a cybersecurity company) was only marginally up by 2%.
Back in the day, it was common for stocks to surge after the stock split, as seen in Tesla and Apple in 2020. However, it seems things are going different this time as not a lot of stocks are rallying up after the stock split announcement.
The function of a stock split is to make the stocks more affordable by bringing down the cost. Another function is to spread the equity of a company over a large number of shares. For many investors, the decision to stock split is usually considered to be positive.
But when a stock split happens during periods of slow economic growth, it is usually done to bring in retail investors. Right now, the US economy is facing higher inflation, higher costs, and slow economic growth.
For the stock market, it seems that institutions are not major buyers - Instead, they are actually the sellers and are viewing the stock split as a weakness sign. But for the retail investors, it is good news since they can now spend less money on buying the Alphabet stock.