Ford Stock Split: No Stock Split for Ford Motors in Last 28 Years. Will we See One Soon?

Ford Stock Split: Analyzing the scope of stock split in Ford Motors in Future, taking cues from Past.

Ford Stock Split: Recent Stock Split News

Amazon Inc surprised everyone by announcing 20:1 stock split aftermarket hours on 9^th March 2022. It was long pending stock split and last one for Amazon took place in 1999. Although it will be immediately effective and vote of shareholders is due on May 25^th 2022 and if approved in the same meeting, it is expected to trade post-split from June 6 2022. Various big companies like Tesla, Apple Inc and Alphabet (parent company of google) has recently declared stock split in last couple of years, and it seems like there is competition of stock split once again after more than two decades, as it appeared to happen from early 1990s till 2000.

The point to ponder in case of stock split is that total ownership of any investor does not change post- split. Also, the market cap of that particular company is unaffected due to share split. From above two points, it seems that share split should be a non-consequential event and it should not have any effect on share price (beyond dividing it in the ratio of split).

After all it is just like either having a large size pizza or having its different slices with you, the ownership over the company (pizza) does not change. But this reasoning has been proven wrong time and again, at least in case of big companies. For example, recently when Amazon Inc announced share split, its share rose almost 6% next day in the volatile market share. Share split although does not have any effect technically, but it does create a sentimental value by making shares more affordable to retail investors so more often than not, share prices rises post-split.

Ford Motors Inc has been one of the oldest companies to trade on NYSE since 19^th March 1982. It is diversifying with need of the hour and has been proactively producing EVs. It has a history of stock split with first one announced in 1962 and last one coming at 1994. The stock split is tabulated below for reference

Ford Stock Split: Stock Split History

Date	Ratio	Price (Close)	Price the day before	Change
July 6, 1994	2:1	28.87	57.87 (July 5)	-0.22%
Jan 13, 1988	2:1	39.37	79.38 (Jan 12)	-0.81%
Jun 3, 1986	3:2	54.25	80.75 (Jun 2)	0.77%
Dec 2, 1983	3:2	41.50	62.88 ( Dec01)	-1.00%
Jun 27, 1977	5:4	46.75	57.63 (Jun 24)	1.40%
May 31, 1962	2:1	–	–	–

The inferences from the history of Ford Motors are listed below:

Ford Stock Split: A series of splits between two decades

Ford announced first split in 1962 and then second split came after 15 years in 1977. But, then company has announced five number of splits in less than 17 years, between 1977 and 1994. It is seen from above table that in a span of five to six years, Ford has announced a stock split in those two decades. But, now it has been almost 28 years since the last split and management is muted on this topic.

Read: Ford Stock Forecast

Ford Stock Split: Mixed Reaction Post Split

Generally it is seen that split do create a sentimental value in investors which give a positive push to the share value in short term. The same is seen with the stock split of Apple Inc, Amazon Inc, Tesla and various other companies. But same is not the case with Ford Motors. Its stock split has not drawn positive reaction from general public post-split.

The share price post-split moved higher only on two occasions (1986 and 1977) (adjusting price beyond the split ratio). It moved lower on three number of occasions (1983, 1988 and 1994) (adjusting price beyond the split ratio). It has moved lower even by 1.00% on next day after 1983 split. From the above point we can conclude that stock split have not been very successful for Ford Motors

Ford Stock Split: Will Ford Motor Announce Another Stock Split in 2022?

While stock split cannot be predicted in advance and is solely the decision of management. It needs to be approved by board of directors in a shareholders meet. But the chances for another stock split in recent future, especially in 2022 is very bleak.

There are reasons for the same. The first and foremost is the share price of the company. The primary reason and logic behind stock split is to make it more affordable to the retail investors so that it finds a place in their portfolio. For example, Amazon Inc recently announced the 20:1 share split when its share prices have touched $3000, to make it look “cheaper” for retail investors. But same is not the case with Ford Motors. Its share price is $16.04 (as of 11.03.2022) and there is no point of reducing the share price by announcing the split as it is already affordable for the investors.

Another point against a share split in the upcoming future is the inference from the past splits. Ford has announced stock split when the share prices have crossed $50 on all occasions. On one occasion, in 1988, Ford Motors announced it when share prices touched $80. Current share price is nowhere between $50 and is not expected to touch the same even in couple of years from now, (it is on the basis that Ford Motors share rose only $3.56 in last five years and has given only 28% returns). From this we can say that it is expected to consolidate in the range $10 to $20 for a while, until some dramatic happens in the company.

Recently, Ford Motors announced that its EV section will report earnings separately beginning from next fiscal year. And EVs is the big thing for the future. It may happen that we see Ford EV section IPO in the future after a successful spin off from the conventional vehicle business and we may share split of EV company in the future. Accessing the current scenario, it is hardly unlikely that we may see a share split till share prices touch $50.

-Vineet Agarwal

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