Bryon Daly wrote:
>
> >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.
You're probably right. 20 years ago, though, it was a different story.
Now, if you're going to do a number of buying and selling transactions
of stock on the same company, it's a little easier for your own
recordkeeping if you do round-number blocks, but the brokers probably
don't really care about *that*. :)
> >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").
If your stock price gets too low, and your company is publicly traded,
it may get booted off the exchange it has been on. (Anything falling
under $1 is likely to get booted off the major exchanges, by my
understanding, which may be imperfect.)
In general, when stocks get above $100, people seem to be less likely to
buy them -- if you were going for an even 100 shares, that's over
$10,000 tied up all in one transaction. Yikes, from a psychological
point of view for some investors. A simple split will bring you back
down to $50, or $5000 for 100 shares, which is in the comfort zone for
more people.
Berkshire Hathaway is a special case which has been discussed elsewhere
in the thread, and I have nothing to add to that part of the discussion.
Julia
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