Summary
Vipshop announced a 10-1 stock split.
What this means for your investment.
Why I believe this is great news for investors and those interested in getting into a very profitable and fast growing company.
.....
This article is going to cover what exactly a stock split is, what it means for current investors, as well as looking at the pros and cons of a stock split...Vipshop's 10-for-1 split means that every current shareholder will now have 10X the number of shares. Because Vipshop currently has 56.7M shares outstanding, this figure will grow to 567M on November 4th when the market opens, although the stock price and the number of shares outstanding changes, the market capitalization remains the same.
Oftentimes, it's because shares are either too high or beyond the levels of similar companies in their respective sector and industries. For Vipshop, these companies are Alibaba (NYSE:BABA), Jumei (NYSE:JMEI), JD (NASDAQ:JD), and Dangdang (NYSE:DANG), just to name a few.
Of course, the primary reason is to make shares seem more affordable to the mom-and-pop investors.....
1.Splitting the stock brings the share price down to more of an "attractive" level. The effect here is purely psychological.
2) Increase of Liquidity - With shares closing in on $230, volume started drying up with less than 1M shares changing hands. Stocks with low volume make it hard for investors and traders to get in and out of a stock without significantly driving shares higher or lower.
3) Buying Indicator - A stock split can be a very good buying indicator, as it signals that the company's share price is and will continue to increase over time.
4) Immediate Impact - A stock split usually results in shares immediately increasing following the split. This is because many smaller investors think shares are more affordable and buy the stock, therefore boosting demand and driving up prices.......
VIPS: The Next Baidu?
..Vipshop is now taking a play from Baidu. By splitting shares, shares of Vipshop will now be available to an even broader audience.
After raising close to $72M in its March 2012 IPO (shares priced at $6.50), shares of Vipshop have risen an astonishing 4,000%, and don't look to be slowing down anytime soon.....
stock splits are signals from management that they have confidence in the continued appreciation of the companies' shares....... Based on Vipshop's history, don't be surprised to see shares climb back into the triple digits, even after this split.
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