Why is Palo Alto Networks inventory worth so “low” right this moment? Don’t be concerned. It has simply divided

If you happen to’re an investor in Palo Alto Networks and awoke this morning to be speechless while you noticed the inventory worth (Nasdaq: PANW), don’t fret. The inventory truly did not fall almost 50%. As an alternative, it merely cut up. Here is what you want to know.

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In November, Palo Alto Networks announced that he cut up its inventory 2-for-1 after the closing bell on Friday, December 13. The inventory would start buying and selling at its new split-adjusted worth on Monday, December 16. If you happen to did not know that, you would be forgiven for considering one thing had gone horribly incorrect on the cybersecurity large.

On Friday, PANW inventory closed at $393.12 per share (down about 1.7% for the day). However after the closing bell, the corporate’s inventory worth then cut up, bringing its inventory worth right down to $196.56, the extent at which PANW shares started buying and selling after the cut up.

So regardless of the massive numerical distinction in Palo Alto’s inventory worth between Friday and right this moment, the corporate’s shares are literally comparatively secure. As of this writing, PANW shares are at the moment up about half a p.c from their pre-split shut on Friday, at $197.60 per share.

A inventory cut up is an occasion that happens when an organization decides to artificially decrease the value of its inventory. An organization can do that by splitting its shares. When a inventory is cut up, then there are extra shares within the firm than there have been earlier than. Since there are extra shares, the worth of every share is decrease, leading to a decrease inventory worth per share.

Inventory splits may be performed in any ratio. Palo Alto Networks has determined to do a 2-for-1 inventory cut up, probably the most widespread. Because of this for each share of PANW that existed on the shut of the bell on Friday, two shares of PANW exist right this moment. However since there are twice as many shares, every share is value half of what it was value earlier than the cut up.

Neither. Except for the conventional fluctuations after the shut or earlier than the market opens, the worth of an organization is mostly comparatively the identical earlier than and after the cut up. Certainly, the worth of an organization, known as market capitalization, is decided by including the entire worth of its shares.

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