Broadcom’s Stock Split: A Guide to the 10-for-1 Split

Broadcom (AVGO) surprised investors with stellar second-quarter results, boosting shares by more than 13% in Thursday morning trading. The chipmaker beat estimates and raised its revenue outlook, citing strong demand for data centers amid an AI boom. Broadcom’s second-quarter revenue reached $12.5 billion, a 43% increase from a year ago, with AI products generating a record $3.1 billion in revenue. CEO Hock Tan highlighted the growth in demand for AI and VMware products, leading the company to raise its fiscal 2024 guidance to $51 billion in consolidated revenue.

In addition to its strong financial performance, Broadcom also announced a 10-for-1 stock split set to take effect on July 15. This move, the company’s first split since its merger with Avago Technologies in 2016, follows a similar announcement by Nvidia last month. Shareholders of record as of July 11 will receive nine additional shares for each share of common stock they own after the close of the market on July 12, with the stock price trading at one-tenth of its pre-split value.

Traders holding options during the split will see their number of contracts multiplied by ten, with adjustments to theta and gamma values. Despite some changes in premium and sensitivity to stock price movements, the trading mechanics will remain largely the same post-split. Traders should be aware of these adjustments to navigate the market effectively.

Overall, Broadcom’s strong financial performance and stock split announcement have generated positive momentum for the company, with shares surging and traders preparing for the upcoming changes in trading dynamics. As the chipmaker continues to benefit from the AI and data center trends, investors are closely monitoring its growth trajectory and market positioning.

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