Do stock splits matter if you can just buy fractional shares?

Question

I understand that stock splits are meant to make stocks more affordable for more investors but if platforms allow fractional shares like Robinhood, does this matter as much? If theoretically more platforms supported fractional shares, would stock splits matter less and less?

In: Economics

Answer 1

Fractional shares is more of a gimmick. I mean 1 share costs at most a few hundred bucks?

So big investors want to buy thousands of shares, and if no one is selling them, they can’t. The stock split creates more shares to make the system fluid for big investors. The ancillary effect that it helps the little investor is gravy.

So yes, stock splits are important for this reason. The number of shares available puts a soft cap on the number of investors you can have.