From: Erik Reuter <[EMAIL PROTECTED]> On Sun, Jun 01, 2003 at 11:42:20AM -0500, Julia Thompson wrote:
> Brokers prefer to work with bigger blocks.
I've seen little evidence of this in the past 5 years. What do brokers care about whether you buy 1 share or 100 or 1000? They've got their commission schedules set up to make money either way, and they've got their computers and their trading desks set up to handle small or large trades.
Berkshire Hathaway trades at $71,000 per share, obviously not many people are going to be buying 100 shares or more of that. Even the B shares are $2,374 each.
Most of the evidence that I've seen for share pricing is that there is a slight disklike for shares below $10 (some institutional investors are prohibited from buying them), and maybe a trade on my online broker executes a couple seconds faster if it is an even multiple of 100 shares (probably because if you are an institutional investor, you place and order for, say 60,000 shares instead of 63,738), but this is of little importance. Maybe it makes the specialist's job slightly easier, but it also reduces the number of transactions so I guess the specialist would be neutral on the matter.
There seems to be some thought that a certain price range can make a
stock more attractive and liquid. I believe that's why you frequently see
stock splits when a stock price creeps up into the 100's. As I've heard it,
stocks in the $30-80 range are thought to have more "upward" pressure
than pricier stocks. (Obviously, any truth to this is mostly due to the
perceptions of individual stock buyers that pricer stocks are "too expensive").
I heard that Microsoft tends to split its stock to keep near that range is to
make it more attractive for individual buyers. On the other end, I've also
heard that Warren Buffet's refusal to split the Berkshire Hathaway stock
is snobbery intended to "keep the riffraff out", by making the stock
unaffordable for all but the richest investors.
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