Q:

Who benefits from a WellPoint stock split?

A:

Quick Answer

Existing shareholders of Wellpoint stock, WLP, own the same total monetary value immediately before and after a stock split. Stock splits may benefit the company and its shareholders by attracting demand from other buyers who look to purchase at a particular price point, such as certain types of mutual funds.

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Full Answer

Stock splits that increase the number of shares and reduce the price per share may attract demand from other buyers that have lower price points; if this occurs, it can cause the price of the stock to appreciate. If appreciation occurs, all existing shareholders benefit. Smaller investors benefit by stock splits as well because they are more easily able to afford the stock.

Reverse stock splits can be beneficial for the company and its shareholders if the price is too low. A reverse split that raises the price benefits owners of certain mutual funds because it allows the funds to purchase the stock. After a reverse split, the stock is available to mutual funds that only purchase stocks at a certain minimum price per share.

In general, stock splits and reverse stock splits only benefit shareholders if the post-split price point makes the stock more desirable to additional buyers. As of 2015, there are three recorded stock splits in the history of WLP. There was a 2 for 3 reverse stock split on May 21, 1996. There were also two 2 for 1 splits on March 18, 2002 and June 1, 2005.

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