MS plans two for one stock split

We number-crunch the share price history of the gold mine

Microsoft yesterday announced a two-for-one stock split, effective on 29 March. Stock splitting has more to do with psychology than the purported reason "to make our stock more accessible to a broader range of investors". But of course, this would only be true if a significant number of investors wished to buy one share because they could not afford around $160. The latest split is subject to shareholder approval on 12 March. The exact wording of the announcement gave away that the split was arranged so hastily that nobody had time to book a venue for the meeting, so its only "expected" to be held then. The purpose of the meeting is to approve an increase in the authorised common stock to allow there to be around five billion shares outstanding. It was specifically stated that no executives would make any formal presentations at the special shareholder meeting. The history of the Microsoft share price is the stuff of legends. An original share will now be the equivalent of 144 shares after the current split. The shares were launched at $21 on 13 March 1986, when Gates had some 45 percent of the company. Some arithmetic suggests that value of an original $21 share is worth $11,655, at last night's close. That's an increase of 555 times. This split is the eighth, with the previous one being in February last year. For the latest three splits, Microsoft seems to be splitting around the time the $150 mark is reached. Previously it had split at around the $100 mark. The advantage to shareholders is that splitting often gives the shares a boost by drawing attention to how much they have increased in value, attracting more investors and so driving up the price. It was probably decided on the spur of the moment at one of Microsoft's very informal board meetings that it would be better to split the shares now, soon after the obscenely profitable quarter that has just been announced, rather than giving that independent part of the media that still remains anything to use against Microsoft as the trial nears its conclusion. Keep your loose change ready for a split in IBM's shares: at $185, it's probably due. That's quite a recovery from the sub-$50 price at the end of IBM's dark period. ®

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