The Bitcoin Investment Trust GBTC jumped more than 12 percent Friday after the company announced the trust will be undergoing a 91-to-1 stock split impacting shareholders of record as of Jan. 22.
The move is likely being made after the trust’s incredible 1,620 percent gain in the past year has made shares of the trust prohibitively expensive to some retail investors. As of Friday morning, the GBTC fund was priced at roughly 1,900 per share.
Stock Splits
Stock splits are generally seen as a positive by the market. Stocks and funds like the GBTC trust are often put in a position to split their stocks only after an extended period of strong returns. Once the price of a stock or fund gets too high, even single shares may become too expensive for small, retail investors, limiting demand for the stock.
In addition to ensuring access to all investors, a stock split is typically also an indication that management doesn’t see the current market value as overinflated, another bullish sign.
Finally, there’s a psychological component to stock splits that also bodes well for bulls. Even though stock splits don’t inherently increase the market cap of the stock or fund, the new price “seems” cheap to a market that is used to the pre-split price. After paying nearly $2,000 per share for the GBTC trust, investors may perceive the post-split price (presumably around $21 per share) as a good deal.
For all of the reasons mentioned above, multiple market studies have shown stocks that have split typically outperform the market following the split. GBTC investors are hoping their split will be no exception.
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