hole in Richard's shorts is from my squirrel friends going for his nuts... what the hell is ROFLOL ? is that Clingon language?
Todd,
Got me thinking about splits... while your magnacap examples are not from our smallcap world, I was overly simplifying things... so I put together a list of reasons I have read about, heard from company statements, heard from internal documents in my company (which splits 3/2 every 12 months) ... go easy on me, Todd, just putting out thoughts from a former derelict turned trader investor
REASONS TO SPLIT
THQ applies to all but maybe #1 and #7
1) get below $80-100 in share price so as to avoid being seen as "expensive"
2) increase share volume daily (agree liquidity is unaffected, $$$ based)
3) make stock more attractive to perhaps the hordes of small investors
4) reduce corporate outlays for incentive stock option plans (for board members, corp execs, partner execs, mgmt, key individual employees)
5) bolster confidence in stock, with implicit claim on future growth
6) gain free publicity by media
7) satisfy whims of founder and board members
reason #1 is true IMO for Coke, Disney, Exxon, EMC, Caterpillar, etc
reason #3 cited by countless splitters
reason #4 is a big big factor for many fast growing little companies who attempt to control the ever growing outlays for options, intending to make them available to a larger group of employees as true incentive (cited by Iomega, EMC, my company)
Company that splits must be confident not to pull back under $10 on share price, a whammy on margin-eers
for what it is worth, I feel better now
/ JW |
