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Conference nyoss1::market_investing

Title:	Market Investing

Moderator:	2155::michaud

Created:	Thu Jan 23 1992
Last Modified:	Thu Jun 05 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1060
Total number of notes:	10477

470.0. "Why does a stock split (aka Intel will split 2 for 1 on June 6)?" by LMOPST::AUDIO::MCGREAL () Fri May 07 1993 15:05

	Since I am an Intel shareholder I recently voted (via proxy) on a
	2 for 1 stock split which was approved. The split will take place
	on June 6 or there abouts.

	The only reason I can think of for why a stock would split is that
	at a lower price there is more of a market for the stock. In other
	words it is easier to sell a share that costs $50 than one that costs
	$100. 

	Are there any other reasons for splitting a stock?

	Pat

T.R	Title	User	Personal Name	Date	Lines
470.1		CPDW::ROSCH		`Fri May 07 1993 16:02`	1
	Provide brokerage houses with additional revenue ;-)
470.2	fwiw	NOVA::FINNERTY	Sell high, buy low	`Fri May 07 1993 16:54`	9
	I remember reading about one theory... investors seem to view a stock split as an indication of managements' confidence in the earnings prospects of a company. The rise in price that usually preceeds the split date is, according to this theory, a reaction to new information about managements' confidence. A study that looked into this found that if the companys' earnings failed to live up to these increased expectations within one year, the stock underperformed the market by a like amount.
470.3	Hot tip!	SAHQ::ROSENKRANZ	Rock with Gene & Eddy	`Fri May 07 1993 17:34`	4
	As an interesting intellectual exercise, go figure out what it would cost you to buy 100 shares of Berkshire Hathaway. ;+) jim
470.4	That's a lotta tea	VMSDEV::HALLYB	Fish have no concept of fire	`Mon May 10 1993 09:15`	2
	... but a round lot of BH is only 10 shares. Jim must be making more profit than I ...
470.5	Whats the bid/ask spread?	SAHQ::ROSENKRANZ	Rock with Gene & Eddy	`Mon May 10 1993 10:39`	1
	When it comes to BH, I'm strictly an odd-lotter. ;+)
470.6		AOSG::GILLETT	But that trick never works!	`Mon May 10 1993 12:28`	13
	One real reason for a stock to split is to increase the number of shares in circulation, and thus make the stock more attractive to institutions. Some growth companies (Media Logic springs to mind...) don't have a large enough float to make the bigger institutions bite. That's probably not the suituation with Intel, however. Southwestern Bell just announced a 2-1 split recently with stock prices soaring in the 70s and 80s. Seems a little unclear to me what they have to gain by it. ./chris
470.7	How about unit increases in price?	SPECXN::KANNAN		`Mon May 10 1993 12:37`	11
	My guess is that since the price for each share increases in terms of a minimum of 1/8th point, the smaller the price is, the greater the gain for the owner. A 1/8th point increase on a 100$ stock is .125%. The same gain when it is split is double that, .25%. In other words, it helps maximize shareholder value. But the kicker seems to be a gamble on the future of the stock. Management is in the best position to determine that. Nari
470.8		GVA02::ZIMAN		`Fri Jan 20 1995 06:32`	4
	In a related question, how would I find out the last time that a stock split? I am in interested in Sun Microsystems (SUNW) thanks
470.9	See VALUE LINE	BIGQ::SORRELLS	Hell has my E-Mail address	`Fri Jan 20 1995 12:38`	3
	Check the library in Value Line - on the page for each company, splits are noted on the stock graph, although I am not sure the exact day is given.