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November 21, 2000

Q. What does "split-adjusted" mean?

--F.R., Elyria, Ohio


A. It means a stock price has been changed to reflect stock splits that have occurred over time.

Consider Coca-Cola. It came public in 1919 at $40 per share and has split its stock 10 times since then. Its current stock price is in the $60-per-share range. Does that mean that the shares have appreciated only about 50% since 1919? Far from it. Remember the effects of splitting. With each split, you end up with more shares, worth proportionately less. (So a 2-for-1 split gives you twice as many shares, each worth half as much.) One 1919 $40 share has now become 4,608 shares. If the stock had never split, each share would be worth more than $5 million. (Few people could afford to buy even one!)

You'll see the term "split-adjusted" when you look up or read about historical stock prices. For example, in late 1970 Coke's stock price was roughly $1.67, split-adjusted. The price was actually about $80 per share then, but in order to compare it with today's price, you need to adjust the price for splits that occurred between then and now. That way, you can tell at a glance that Coke's shares haven't fallen from $80 to $60 in 30 years, but instead have advanced considerably, from the equivalent of $1.67 to $60.

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