What does the two-for-one stock split at Tractor Supply mean for shareholders?

tractor_supplyThe Tractor Supply Company (TSCO) declared a two-for-one stock split of its common stock on August 29, 2013. The following news release appeared in PR Newswire in 2013:

“BRENTWOOD, Tenn., Aug. 29, 2013 /PRNewswire/ — Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced that its Board of Directors approved a two-for-one stock split of its common stock. Stockholders of record at the close of business on September 18, 2013 will receive one additional share of Tractor Supply common stock for every share of Tractor Supply common stock owned on that date. The additional shares are expected to be distributed on September 26, 2013.” 

Questions

  1. If a shareholder owns 1,000 shares of TSCO on September 1 and sells all of those shares on September 16, how many shares will that shareholder own after the stock split?
  2. If a shareholder owns 2,000 shares of TSCO on September 18, 2013, how many shares will that shareholder own on September 18, 2013?  Assuming the shareholder has not sold any shares, how many shares will that shareholder own on September 26, 2013?
  3. Why do you think there is a period of time between the following dates:
    1. Date of declaration
    2. Date of record
    3. Date of distribution
  4. Assume that the stock price of Tractor Supply (TSCO) averages $120 in the first two weeks of September 2013. What would you expect the approximate stock price per share to be once the stock split is executed?
  5. Why would Tractor Supply Company want to split its stock?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. †Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. †The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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