Page 1 of 2 12 LastLast
Results 1 to 13 of 22

Thread: American shares splits and rights issues

  1. #1


    Did you find this post helpful? Yes | No

    American shares splits and rights issues

    Not exactly Blackjack but since there are a few threads on stocks I thought I'd ask a question that's been on my mind for a while...

    For many years, even decades, the directors of large American corporations used to declare stock splits of 2:1, 3:1, etc in order to lower their share price and make it more affordable for people to invest in their company. Occasionally, they would also award existing stockholders with additional shares through rights issues.

    All this appears to have stopped around 20 years ago and my question is why?
    Casino Enemy No.1

  2. #2
    Random number herder Norm's Avatar
    Join Date
    Dec 2011
    Location
    The mote in God's eye
    Posts
    12,456
    Blog Entries
    59


    Did you find this post helpful? Yes | No
    Most share holders are institutional these days. Might make a difference as institutions are large holders anyway. The fee for number of shares is very low for Delaware, which is where most companies are incorporated. So that shouldn't matter. I think some of the new high growth companies (Amazon, Tesla, Google) just like a high price as it indicates their growth. Although Tesla and Apple have split five times, last in August. Just musing.
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

  3. #3


    Did you find this post helpful? Yes | No
    Quote Originally Posted by davethebuilder View Post
    Not exactly Blackjack but since there are a few threads on stocks I thought I'd ask a question that's been on my mind for a while...

    For many years, even decades, the directors of large American corporations used to declare stock splits of 2:1, 3:1, etc in order to lower their share price and make it more affordable for people to invest in their company. Occasionally, they would also award existing stockholders with additional shares through rights issues.

    All this appears to have stopped around 20 years ago and my question is why?

    You might enjoy this article:

    https://www.marketwatch.com/story/st...ket-2019-10-11

    Don

  4. #4


    Did you find this post helpful? Yes | No
    Interesting article and comments.

    I have read that Berkshire Hathaway never split or even paid a dividend because Warren Buffet wanted to attract long term stock holders and minimise turnover on the share register. Today, the shares are worth around US$350K each but that's an extreme example.

    The growth of institutional shareholders in the market makes sense especially superannuation funds that did not exist years ago (at least in Australia) and that would support higher prices. Fractional share buying is also an option that I don't remember being available.
    Casino Enemy No.1

  5. #5


    Did you find this post helpful? Yes | No
    Tesla split 5:1 a year or so ago.

  6. #6


    Did you find this post helpful? Yes | No
    Quote Originally Posted by davethebuilder View Post
    Interesting article and comments.

    I have read that Berkshire Hathaway never split or even paid a dividend because Warren Buffet wanted to attract long term stock holders and minimise turnover on the share register. Today, the shares are worth around US$350K each but that's an extreme example.

    The growth of institutional shareholders in the market makes sense especially superannuation funds that did not exist years ago (at least in Australia) and that would support higher prices. Fractional share buying is also an option that I don't remember being available.
    Companies can and do split all the time, especially when the price of the share gets to be above a certain dollar figure. I wouldn't be surprised to see Amazon and Google stock split at some point in the next few years.

    You're right that Berkshire has never split, but you can still buy their B shares, which are worth 1/1000 of their A shares.

  7. #7
    Random number herder Norm's Avatar
    Join Date
    Dec 2011
    Location
    The mote in God's eye
    Posts
    12,456
    Blog Entries
    59


    Did you find this post helpful? Yes | No
    But, do they split tens?
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

  8. #8


    Did you find this post helpful? Yes | No
    Quote Originally Posted by Norm View Post
    But, do they split tens?
    Or atoms? Or infinitives?

    Dog Hand

  9. #9
    Banned or Suspended
    Join Date
    Oct 2018
    Posts
    1,154


    Did you find this post helpful? Yes | No
    Quote Originally Posted by Dog Hand View Post
    Or atoms? Or infinitives?

    Dog Hand
    I found out your CVData simulation is incredibly powerful. Great job!

  10. #10


    Did you find this post helpful? Yes | No
    Quote Originally Posted by Norm View Post
    But, do they split tens?
    Charlie Munger always splits 10s.

  11. #11


    Did you find this post helpful? Yes | No
    Charlie Munger was a Bridge player. Occasionally, he played Poker and once noted that his success in business was, in part, based on the lessons he learned playing these two games.
    Casino Enemy No.1

  12. #12


    Did you find this post helpful? Yes | No
    Quote Originally Posted by davethebuilder View Post
    Not exactly Blackjack but since there are a few threads on stocks I thought I'd ask a question that's been on my mind for a while...

    For many years, even decades, the directors of large American corporations used to declare stock splits of 2:1, 3:1, etc in order to lower their share price and make it more affordable for people to invest in their company. Occasionally, they would also award existing stockholders with additional shares through rights issues.

    All this appears to have stopped around 20 years ago and my question is why?
    I know the thread is kinda old but this is right up my alley of focus while I'm learning to be an AP.

    Basically the consensus among the people who study these trends is because "Reg NMS" which was fully implemented in 2007. Here is an article describing what Reg NMS is.

    https://www.nasdaq.com/articles/reg-...ies-2019-05-09


    And an article talking about stock splits. Just skim all the way near to the end to the part saying "This lack of splits is not normal"

    https://www.nasdaq.com/articles/spli...lly-2020-09-24

    There has been a debate among Financial Economists on why the lack. It's happening in the background because regulators won't listen until there is proof and on top of that Regulators need to know the exact item to change in "Reg NMS" that will prevent this which the Fin Econ isn't able to provide.

    I'm on the camp that it's due to more odd lots trading which causes prices to soar thus removing the barrier to higher prices, which also reduces the pressure for companies to split stocks to reduce share prices. Reg NMS did make it easier to trade in Odd lots in USA while in other countries that implemented different regulations on Electronic trading which included regulations to reduce odd lot trading does have more regular Stock Splits. If you check the number of stocks splits in 2016-2021 you'll find a majority of them is Stocks that aren't traded in American Stock Markets.

  13. #13


    Did you find this post helpful? Yes | No
    I’ve been advised that one of the main reasons for the lack of splits and rights issues is the dramatic increase in US open market buybacks from 1980 – 2005. The idea is that the shares are cancelled and the money added to retained earnings with the aim of increasing earnings per share for existing stockholders. It’s also another way of distributing cash reserves to stockholders in addition to dividends and is beneficial to the company if the shares are undervalued at the time of purchase.
    Casino Enemy No.1

Page 1 of 2 12 LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

About Blackjack: The Forum

BJTF is an advantage player site based on the principles of comity. That is, civil and considerate behavior for the mutual benefit of all involved. The goal of advantage play is the legal extraction of funds from gaming establishments by gaining a mathematic advantage and developing the skills required to use that advantage. To maximize our success, it is important to understand that we are all on the same side. Personal conflicts simply get in the way of our goals.