Stock price is often one of the first things a retail investor learns about a company when they consider buying shares. And while the price seems to convey an image, in reality it represents a totally arbitrary division of a company's assets based on the number of shares a company has decided to issue. The virtual irrelevance of stock price to underlying assets can be demonstrated by the prices of two Wisconsin bank stocks. Yet individual investors sometimes use price as the clue to something meaningful about the company - its reliability, its size, its status, its prospects. But don't ask him why.
Some numbers are just magic numbers.
The more time I have spent following the market, the more obvious it has seemed that many companies actively work to keep their stock prices in a specific range by splitting the stock each time it reaches an upper trading limit. I wonder whether the ulterior motive is to have the stock price itself convey an image that the company desires. In my view, a stock price in the hundreds is still counted on to indicate unmistakable investor confidence - the IBM effect. Until recently, small companies tended to have small share prices. But here we are in a new century, if not a new paradigm.