

Facebook is splitting shares 5-for-1 - msort
http://www.reuters.com/article/idUSTRE6904J720101001

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ghshephard
So, the following comment was made: "Part of the reason for Friday's split,
said Facebook spokesman Jonny Thaw, was to help reduce the price of Facebook's
shares, which have risen significantly in recent years."

Now, a reasonable argument can be made that once shares start to be worth more
than $10,000 - and certainly in the case of outliers like BRK-A (currently at
$124,015/share), there is an argument for a split (or, in the case of BRK, a
tracking stock - BRK-B) - simply to prevent the creation of pools that allow
people who don't want to buy $10,000 in a single stock to participate. (I
think that's why Warren had BRK-B created)

But, facebook is trading in the secondary markets (sharespost) at $72. Even
assuming they double in value, that would suggest a price that anyone who
wanted to purchase, could do so.

So, clearly, there is another reason as to why this stock is being split - and
I don't put much merit in the "When a stock is split, it shows an increase in
value" - I have far too much faith in the efficient market to put much belief
in that nonsense.

My theory, is that there are other, secondary benefits from splitting a stock.
My two guesses are:

o Bankers get to book a bunch of revenue from splitting the stock and the
paperwork that goes with it, so they sell mgmt on the idea.

o Some legal advantage to splitting shares, and possibly doing an inventory of
all the stock certificates outstanding, getting an audit of the shareholders,
etc...

Is there anybody that has been on the decision making team for a stock split
that would like to weigh in on this one?

