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On March 1st, Beijing time, Baidu held a shareholders' meeting at its Beijing headquarters and approved a plan to split its common stock at a ratio of 1 to 80. The board of directors of Baidu has approved changing the ratio of Class A common stock represented by its ADS (American Depositary Shares, hereinafter the same) from 1 ADS representing 1 share of Class A common stock for every 10 ADSs, to 1 ADS representing 8 shares of Class A common stock, effective March 1, 2021.
1. How will Baidu split its stock?
According to the announcement, Baidu will split its common stock at a ratio of 1:80, and after a series of adjustments, ensure that investors who already hold Baidu stocks will not have their interests harmed; investors do not need to worry. In addition, in 2010, Baidu announced that it would adjust the exchange ratio between its American Depositary Shares (ADS) and Class A common stock, from the original 1 ADS for 1 common share, to 10 ADSs for 1 common share. After the stock split, shareholder equity and total market capitalization will not change, but trading volume and liquidity will increase.
2. What is the significance of Baidu's stock split?
As retail investors’ influence continues to grow, this move is conducive to lowering the threshold for investor transactions and enhancing trading liquidity. Analysts said that theoretically, a stock split is just a technical operation, but splitting the stock can lower the share price, attracting more retail investors to buy.
After the internet bubble burst in 2000, due to the dominance of institutional investors like funds, using stock splits to attract retail investors became unpopular in the US stock market. However, a pandemic changed the way American investors invest, with a large number of retail investors flooding into the stock market, drawing market attention to their chase of popular stocks. Data from Robintrack, a zero-commission trading platform run by an online brokerage, shows that since 2020, amid market volatility triggered by the pandemic, retail investors accounted for over 20% of US stock trading volume, peaking at 25%, compared to only 10% last year.
1. How will Baidu split its stock?
According to the announcement, Baidu will split its common stock at a ratio of 1:80, and after a series of adjustments, ensure that investors who already hold Baidu stocks will not have their interests harmed; investors do not need to worry. In addition, in 2010, Baidu announced that it would adjust the exchange ratio between its American Depositary Shares (ADS) and Class A common stock, from the original 1 ADS for 1 common share, to 10 ADSs for 1 common share. After the stock split, shareholder equity and total market capitalization will not change, but trading volume and liquidity will increase.
2. What is the significance of Baidu's stock split?
As retail investors’ influence continues to grow, this move is conducive to lowering the threshold for investor transactions and enhancing trading liquidity. Analysts said that theoretically, a stock split is just a technical operation, but splitting the stock can lower the share price, attracting more retail investors to buy.
After the internet bubble burst in 2000, due to the dominance of institutional investors like funds, using stock splits to attract retail investors became unpopular in the US stock market. However, a pandemic changed the way American investors invest, with a large number of retail investors flooding into the stock market, drawing market attention to their chase of popular stocks. Data from Robintrack, a zero-commission trading platform run by an online brokerage, shows that since 2020, amid market volatility triggered by the pandemic, retail investors accounted for over 20% of US stock trading volume, peaking at 25%, compared to only 10% last year.
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