5 ms·

Why? Is anyone else surprised that up 50% is $4?

• tome 10y ago
  Why do you think the price per share is relevant?
  • kwsmith 10y ago
    Because while logically the price is irrelevant, in practice is isn't. Prices below $5 often indicate that a company is in trouble. Which I think is what the unfairly downvoted comment above was referring to.
    • tome 10y ago
      > Prices below $5 often indicate that a company is in trouble. Really? What are you basing that on?
      • nathank 10y ago
        Just read the comments below before posting again.
        • imtringued 10y ago
          Which comments? You do realise that the order of comments is influenced by votes and how recentley they were created? Either give us a proper explanation or a link to the comment you are refering to. Stock splits are only about convenience. Imagine if all we had are $100 bills. Buying groceries will be quite a hassle. The government then decides to do a split and let everyone exchange their $100 bills with 10 $10 bills. Everyone still has the same amount of cash but it's now easier for the average consumer to buy their groceries. How would the existence of a $10 bill mean the economy is in trouble?
          • brianwawok 10y ago
            This is a too simple analogy. Some exchanges wont list a stock if it's under $1. Some brokers wont let you short under $5. If grocery stores took no bill smaller than $1 , would you really want to cash your $10 bill into pennies?
    • lottin 10y ago
      A stock is just an arbitrary fraction of the capital stock, therefore the price in absolute value of a single stock is completely irrelevant. Suppose a company has a market value of $1,000. The company can divide its stock into 1,000 one-dollar shares, or into 500 two-dollar shares. Either way in makes no difference as far as the total worth of the company goes.
      • the_holy_grail 10y ago
        Thank you for the elementary school lecture. You are completely right: This is why companies are so eager to do a stock split at $6. It's all just arithmetic!
      • reddytowns 10y ago
        The NASDAQ market, which AMD is in, and the NYSE require that the price of its stocks are traded at or over $1 to avoid delisting.
  • RockyMcNuts 10y ago
    Sometimes brokers don't allow you to margin (borrow against or sell short) stocks below $5. Sometimes funds have covenants on not buying stocks below $5 because they are considered penny stocks and funds want to claim they focus on quality. Surprisingly, couldn't immediately find a good academic research paper on behavior of low-priced stocks. A priori - - very expensive stocks might be a little cheaper than they otherwise would be, high cost makes them harder to buy for individuals and low cost funds. (e.g. if Berkshire Hathaway stock is $200,000, an individual with a $100,000 portfolio can't buy it, and even a pretty big portfolio can't fine-tune exposure with a lot of granularity. Hence, some enterprising fellows started funds that would just own Berkshire and sell shares in smaller increments, and Buffett got annoyed at that and launched Berkshire B, which sells for $146). - very low priced stocks might be more volatile and show interesting behavior at certain thresholds, penny stocks below $1 might be overpriced since it's a hotbed of speculation, stocks that cross $5 might experience some excess selling so they might be underpriced, on the other hand they might experience some short covering as they become unmarginable for some. But anyway, companies usually aim for a stock price in the $10-100 order of magnitude because that's the area where even relatively small investors wouldn't have a problem fine tuning their exposure. Price < $5 is usually an indication it's well off its high.
• ojm 10y ago
  It's 50%. The share price is irrelevant. Be it $2 to $3 or $100 to $150, the market cap increases the same.
• balaa 10y ago
  yes, its surprising that amd has been so undervalued for so long
• bottled_poe 10y ago
  A $4 share price is comparable to other company share prices relative to market capitalisation. eg. Alphabet at 950B ~ $720 per share. Perhaps the surprising thing is the $4.7B market cap on AMD?
  • Cshelton 10y ago
    Price per share is irrelevant. Going from 2 to $4 is that same 50 to 100. Typically however, companies like to keep their stock price higher as it seems more attractive and a low share price seems less valuable than I.e. $100/share. Market cap is completely separate, all depending on number of outstanding shares.
    • adventured 10y ago
      There are more important practical reasons for slightly higher share prices than appearances. A lot of major brokers (eg Fidelity, Scottrade, TradeKing, TD Ameritrade) won't allow any margin on stock prices below $2 or $3, and often brokers adjust the margin requirements based on price brackets (eg $5 to $3, X% capital requirement; sub $3, no margin allowed). That can cause a margin crunch on investors if the stock falls below $3.
      • MagnumOpus 10y ago
        There are also important practical reasons for low share prices - there are high fees and commissions for trading shares in lots smaller than 100. This makes stocks at low prices attractive for small investors, unlike the Berkshire of old with a price of 100k...
        • GFK_of_xmaspast 10y ago
          Why would AMD (or any major company) care about saving small investors transaction fees like that?
        • sokoloff 10y ago
          Odd lot surcharges have (almost?) entirely vanished.