If there's bad news abrewing, management is likely to decline to undertake a stock split, according to conventional wisdom of managing stock value. The maker of beer and cider products showed slippage in sales when it posted its first quarter results, and there are concerns that earnings may have peaked, leading to the pullback in the share price, two trends that argue against the prospect of a stock split. "Higher stock prices are more prevalent than they used to be," Blitzer said. That's a contravention of what would have been market conditions a generation ago. Within the S&P 500, more than one fifth of its components trade at triple digits. Of the Dow's 30 components, 11 have stock prices that top $100 a share. Which isn't to say that popular indexes don't have high share prices. How can a chief executive be doing anything but a wonderful job if the market thinks the stock he's stewarding is worth $100 or more?)Īnd, as Ikenberry suggested, it's a lot easier to imagine that a $15 stock can climb to $20 in relatively short order than it might be for a $300 stock to get to $400. (CEOs seemingly also like the virtues of high share prices. And CEOs, in general, tend to like nice, liquid markets for their shares - it benefits what Wall Streeters call price discovery. Products like the Dow industrial average and the S&P 500 are heavily leveraged to ETFs, a huge source of liquidity. Want to be alerted before Cramer buys or sells AAPL or GE? Learn more now.Īn exclusion from the indexes can be a drain on liquidity.
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