Stocks splitting?


CEE DOG

CEE DOG

Well-Known Member
When do stocks split? I notice goggle stock at 555.67. I was just wondering when and I guess what determines when they split?
 
They usually split when the company feels the stock price is too high. There is no magic rule of thumb for when they do it. There are even reverse splits where they want to increase the price per share or a cheap stock.
 

Olde Hornet said:
They usually split when the company feels the stock price is too high. There is no magic rule of thumb for when they do it. There are even reverse splits where they want to increase the price per share or a cheap stock.
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Okay thanks. I always wondered how it worked.
 
You don't have to worry about Google splitting their stocks. They apparently are modeling themselves after Berkshire Hathaway (BRK.A) which is Warren Buffet's company. Their stock is $110,500 a share.
 
CEE DOG said:
When do stocks split? I notice goggle stock at 555.67. I was just wondering when and I guess what determines when they split?
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They split when the corporate execs feel it is a need for them to be WORTH MORE MONEY. That is the ONLY reason a stock will split.

If an exec knows the board of directors is going to give him 5000 shares of stock and the current price is $200/share. If the exec knows that the stock will continue to rise in the future, then they will split the stock, giving them 10,000 shares at $100/share. In the near future the stock will get back to $200/share.

That along with pressure from the mutual fund execs who think the price is too high.
 
What's the difference between 5000 shares at $200 and 10000 shares at $100? It seems to me that the value is the same - $1 million.

The primary reason executives split stocks is psychological. It's done to ensure a liquid market. Many people believe that a $100 stock is "cheaper" than a $200 stock. So they are more likely to buy stocks with lower prices. This facilitates the buying and selling that is necessary to have a successful stock market.

Actually, the price of a stock has nothing to do with it being cheap or expensive.
 
msp1911 said:
What's the difference between 5000 shares at $200 and 10000 shares at $100? It seems to me that the value is the same - $1 million.
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You are correct, however the potential of 5000 shares at $200/share being worth $2 million (or $400/share) is less likely that 10000 shares at $100 being worth $2 million (or $200/share).

They split the price because there is more growth value to the stock at $100/share, than it is at $200/share.
 
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