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Technology Stocks : Zitel-ZITL What's Happening
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To: David Brown who wrote (1259)12/1/1996 2:08:00 AM
From: Sal Sell   of 18263
 
David: What you quoted may be the exceptions of the general rule. I recall he said something in class that stock split does not bode well for share holders in general. Stock split means distribution. It is dilutive. It creates an illusion that extra value has been added to the security. But the real fundementals still remain unchanged. The PE ratio, EPS, yields and others (except share outstading) remain the same. The lowering of the price will normally attract more marginal or speculative buyers and as a result the quality of the share-holders decreases and share price volatility increases accordingly. However, due to the increase of the float and the spread between the bid and ask will be narrowed. He also said that Warren Buffett saw the dangers of stock splits and resisted this fallacy of diluting his stocks.

I can identify many stocks that went straight down after their splits. I am sure you could find plenty.

Sal
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