Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Palmberg who wrote (1528)	3/6/1998 1:38:00 PM
From: Bruce Jordan	Respond to of 21876

>>I'm curious about how one deals with valuation issues during a split . . . << Strictly speaking, the split is of no consequence to valuation of the company or the stock (except for the obvious reduction in value of the stock on the day of the split). There will be twice as many shares outstanding, each worth half what they were pre-split (each entitled to half the earnings per share that the pre-split shares claimed, P/E is unaffected, etc.). That said, there is often extra excitement about a company when they have a stock split. Especially with a well known company like LU. The excitement translates into temporary price increases a little while before the split happens (ie., to the pre-split price) and lasting until sometime after the split (so the post-split price is higher than one half the pre-announcement price. I don't claim to be able to time that temporary increase, but there is general agreement that it happens. Of course, companies that issue stock splits are usually dynamic companies with good growth history and prospects, so the intrinsic value should be increasing also. That further clouds the issue - maybe any "temporary" increase will be sustained by "real" value increases from ever improving earnings/prospective growth, etc. Maybe there are some technical analysis experts on this thread that could explain how LU can be actively traded in the days near a split to make money. Not my area (or my temperment).

To: Mark Palmberg who wrote (1528)	3/9/1998 7:55:00 AM
From: Rob L.	Read Replies (1) \| Respond to of 21876

I am continually amazed at the ignorance of people on SI playing the market who do not have a clue how the market works. A stock split means absolutely nothing. It is a psychological tool that companies use to attract the masses. Novice investors would prefer to buy a lower priced stock than a stock trading over 100. Naive investors forget to realize that it is the percentage gain that matters and not the nominal price of th stock. A move from 100 to 110 with 50 shares yields the same gain as a move from 50 to 55 with 100 shares. So forget about stock splits and concentrate on price movement. It does not change valuation of a company and the record date means absolutely nothing. If you buy 100 shares today or if you bought them before the record date (i.e., prior to march 6), when the spilt takes affect in April you will have 200 shares at half the price. If your broker is telling you it is too late, I strongly suggest you dump your broker because he doesn't know what he is talking about (you should question how he passed the series 7 exam without knowing about stock splits). Today's price is 108 so in april after the split, if the stock theoretically does not move until then, it will be at 54. It's 6 of one or half dozen of the other.