2006-09-01 05:04:24 · 7 answers · asked by Leighbucks 2 in Business & Finance ➔ Investing
Most people buy stock in lots of 100. If the stock price is high, it becomes very expensive to buy 100 shares. Companies will split their stock so that it becomes more affordable. That way the stock stays more liquid.
There is another reason that lower priced stocks are more liquid. The bid-ask price is a larger percentage of the value of the stock -- making it more profitable for market-makers. This gives them a better incentive to make the stock liquid.
2006-09-01 05:39:02 · answer #1 · answered by Ranto 7 · 1⤊ 0⤋
Management decides whether they should split their stock. When there's a stock split, the price of a share of stock decreases.
The goal is to make the stock affordable for everyone. Compare Microsoft's stock with Berkshire Hathaway's. If one stock is trading around $20 and the other is around $90,000, which one would you rather put in your portfolio?
2006-09-01 12:12:50 · answer #2 · answered by Jose 2 · 2⤊ 0⤋
Stock splits are usually initiated after a large run up in share price.
2006-09-01 16:37:28 · answer #3 · answered by Anonymous · 1⤊ 0⤋
When a company is doing well to keep stock prices down they will split sometimes such as Chrysler did in the 1980's
2006-09-01 12:09:06 · answer #4 · answered by Scott 6 · 0⤊ 1⤋
The board of Directors determine that, then the vote occurs and finally the split happens.
2006-09-01 14:09:44 · answer #5 · answered by reallyno 3 · 0⤊ 1⤋
When it gets so fat the stock splits open. Gross!
2006-09-01 18:34:16 · answer #6 · answered by Yardbird 5 · 0⤊ 1⤋
This is usually a management decision to control value per share esp. if they want to also buy back some shares....
2006-09-01 12:08:20 · answer #7 · answered by boston857 5 · 0⤊ 1⤋