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Thread: American shares splits and rights issues

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    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
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    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.
    "Croyez ceux qui cherchent la vérité, doutez de ceux qui la trouvent." --André Gide

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    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

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    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

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    Tesla split 5:1 a year or so ago.

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    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.

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    Random number herder Norm's Avatar
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    But, do they split tens?
    "Croyez ceux qui cherchent la vérité, doutez de ceux qui la trouvent." --André Gide

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    Quote Originally Posted by Norm View Post
    But, do they split tens?
    Or atoms? Or infinitives?

    Dog Hand

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    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!

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    Quote Originally Posted by Norm View Post
    But, do they split tens?
    Charlie Munger always splits 10s.

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