Jim Cramer wants to know what the right price for Netflix was on Wednesday. Was it when the stock was up $25 at one point in the morning, soaring on its seven-for-one split news, or when it tumbled back down in the wake of Carl Icahn's victory lap?
"We know that broader ownership is key in a market like this one where home gamers tend to own stocks and institutions tend to rent them. That's why I don't turn up my nose at Netflix's seven-for-one split, even as I recognize that a stock split creates no value," the "Mad Money" host said.
In fact, Cramer does not consider a split in Netflix as being a good reason to buy the stock. It is important to remember that a split is only cosmetic.
Think about it—if you take a pencil and break it in half, you will have two pencils, but you don't have more pencil!
The problem with Netflix really comes down to who owns it, which could be the root of why it split. Right now, the stock trades heavily with institutions and hedge funds, who tend to only rent the stock. Management likely wants more retail investors, who will own the stock over the long term.