Originally Posted by melgross
It doesn't dilute the value.
I do not want to get in argument over this, but it does and I have taken Finance classes at one of the top business schools. It general understood that more hares dilute a value in the company, value is not the same as how much the share costs. Since we all know stock trade at a price which is far different than the true value of the company, the two are not equal. I generally do not like quoting wikipedia, but until a find a better source read and learn and I can tell this, it more complicated than this.
Yes, I read the other article which states Apple's reason for the split and some of this is the psychology of the stock which maybe true. This maybe wishful thinking on Apple part to help drive it up again, we will have to see. Also read what Warren Buffet has to say about stock splits and why he would never split the share in his company, guess what his far more knowledgeable than you and me about this stuff.
Oh i found this in Warren Buffets annual report and he also spoke out against what Apple did, he did not think it was good thing to do. He even use the some people think 10 $10 bills seem to be worth more than 1 $100 bill. yeah some people think more of something mean it has more value, it does not but having too much of something in the market can actually drive down it value in the market. I hope I am wrong and Apple knows what they are doing since very few company have split their shock when it was not growing and saw it increase not decrease.
Edited by Maestro64 - 4/29/14 at 2:21pm
"We often are asked why Berkshire does not split its stock. The assumption behind this question usually appears to be that a split would be a pro-shareholder action. We disagree. Let me tell you why.
One of our goals is to have Berkshire Hathaway stock sell at a price rationally related to its intrinsic business value. (But note “rationally related”, not “identical”: if well-regarded companies are generally selling in the market at large discounts from value, Berkshire might well be priced similarly.) The key to a rational stock price is rational shareholders, both current and prospective.
If the holders of a companies stock and/or the prospective buyers attracted to it are prone to make irrational or emotion- based decisions, some pretty silly stock prices are going to appear periodically. Manic-depressive personalities produce manic-depressive valuations. Such aberrations may help us in buying and selling the stocks of other companies. But we think it is in both your interest and ours to minimize their occurrence in the market for Berkshire.
To obtain only high quality shareholders is no cinch. Mrs. Astor could select her 400, but anyone can buy any stock. Entering members of a shareholder “club” cannot be screened for intellectual capacity, emotional stability, moral sensitivity or acceptable dress. Shareholder eugenics, therefore, might appear to be a hopeless undertaking.
In large part, however, we feel that high quality ownership can be attracted and maintained if we consistently communicate our business and ownership philosophy - along with no other conflicting messages - and then let self selection follow its course. For example, self selection will draw a far different crowd to a musical event advertised as an opera than one advertised as a rock concert even though anyone can buy a ticket to either.
Through our policies and communications - our “advertisements” - we try to attract investors who will understand our operations, attitudes and expectations. (And, fully as important, we try to dissuade those who won’t.) We want those who think of themselves as business owners and invest in companies with the intention of staying a long time. And, we want those who keep their eyes focused on business results, not market prices.
Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the exiting class of sellers. At $1300, there are very few investors who can’t afford a Berkshire share. Would a potential one-share purchaser be better off if we split 100 for 1 so he could buy 100 shares? Those who think so and who would buy the stock because of the split or in anticipation of one would definitely downgrade the quality of our present shareholder group. (Could we really improve our shareholder group by trading some of our present clear-thinking members for impressionable new ones who, preferring paper to value, feel wealthier with nine $10 bills than with one $100 bill?) People who buy for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments.
Splitting the stock would increase that cost (transfer costs), downgrade the quality of our shareholder population, and encourage a market price less consistently related to intrinsic business value. We see no offsetting advantages."