'Split-adjusted' stocks account for historical splits

Motley Fool

Q: What does "splitadjusted" mean? — R.Y.

A: A split-adjusted stock price is one that has been modified to account for past stock splits.

Consider the Coca-cola Co. It went public in 1919 at $40 per share and has split its stock 11 times since then. Shares have recently been trading for around $52 apiece, but that doesn't mean that they have only risen by $12 (30%) over the past century. That's because the $40 price from 1919 hasn't been split-adjusted.

When a company executes a regular stock split, shareholders end up with more shares that are worth proportionately less.

Via those 11 splits (which were mostly 2-for-1, but occasionally 3-for-1 and 4-for-1), a single original share of Coca-cola has become 9,216 shares today. If the company had never split its stock, the value of the shares would never have been reduced — and each share would now be worth around $479,000! Few people could afford to buy even one share.

Most historical stock prices you run across are split-adjusted, if there have been any splits. If you've ever seen outrageously low prices in historical stock lists, this retroactive adjustment is probably to blame.

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Name that company

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Last week's answer

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