Before brokerage commissions were deregulated an individual needed to buy a “round lot” (100 shares) of a company’s stock or paid a much higher per share commission. From what I remember it would not be unusual for the cost to more than double from $3 per share to over $6 per share or even higher. Buying just a few shares would only be done if it was a gift as it didn’t make sense to buy ten shares or fewer.
Management tried to keep its shares around $30 to $70 so that the cost to buy them was $3,000 to $7,000 as they knew most people wanted to buy in round lots. While buying a round lot of Apple’s shares today would now cost about $52,000 I believe for the following reasons Apple won’t be splitting its shares.
1) With on-line brokers such as Charles Schwab and eTrade driving down the transaction cost on any number of shares to $8.95 or less an individual doesn’t need to buy a round lot anymore. There isn’t a penalty for buying one to ten to ninety-nine shares. They should be thinking about how much money they want to invest in a stock.
2) Apple is a master at free publicity and getting the press to talk about a $500 or $600 or $700 stock, even when it declines, is another story written about Apple.
3) If Apple split the stock 10 for 1 it would be harder to materially beat earnings. In the September 2012 quarter EPS guidance was $7.65 and its actual earnings was $8.67. While it disappointed the Street it was over a dollar more than guidance. If there had been a ten for one split guidance would probably have been $0.76 per share and earnings would have been $0.87. While all the relative metrics are the same, beating guidance by $0.11 just isn’t nearly as impressive.
4) Along the same lines Apple would have close to ten billion shares outstanding so any per share metric seems small.
Disclosure: My family and I own Apple shares.
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