NEW YORK — NEW YORK -- Tightwads take note. Individual investors in the U.S. can now buy stock in Merck & Co., the nation's biggest drugmaker, directly from the company.
Just send Merck an enrollment form and a check for at least $350, plus a $10 enrollment fee.
"It's no muss, no fuss investing," said Charles Carlson, a certified financial analyst and editor of the No-Load Stock Insider newsletter. "It doesn't get much easier."
Or cheaper. Merck is one of about 200 American corporations that invite investors to buy their shares directly from the companies or their bank representatives, bypassing brokers and brokers' commissions. Some companies charge between $10 and $15 to set up an account, a dollar or two for each transaction, or a fee only when an investor sells their stock. Other companies charge nothing at all.
In the end, it still represents a big savings from what brokers charge. The brokerage fee for buying 100 shares or less of Merck ranges from $29.95 to $55 at discount broker Charles Schwab & Co., depending on whether an investor uses a broker, the Internet or other services. Full-service brokers such as Merrill Lynch & Co. charge more.
As with most plans, investors can buy more shares with all or part of Merck's 40 cents-a-share quarterly dividend, make weekly purchases of between $50 and $50,000, or can have monthly investments of at least $50 wired out of their bank checking accounts. When these services come with fees attached they remain much less costly than using a broker.
Spurred by favorable Securities and Exchange Commission rulings in late 1994, the number of companies that sell their shares directly to investors has exploded. Each month a dozen or more companies are starting direct-purchase programs. Carlson estimates that within two years, between 500 and 1,000 companies will offer the option.
The list of companies already includes such blue chips as Procter & Gamble Co., McDonald's Corp., Sears, Roebuck & Co., Chevron Corp., Exxon Corp., and Texaco Inc. -- all part of the Dow Jones Industrial Average, along with Merck.
J.P. Morgan & Co. runs a program allowing individual investors in the United States to buy American depositary receipts of more than 40 foreign companies.
A couple of years ago, there were only about 50 companies offering direct stock sales, and the list was dominated by slow-growing electric utilities.
The lag between when an order is placed and when it is executed draws attention to one of direct investing's drawbacks: speed. The process generally takes two weeks or more.
And the stock's price can change significantly in either direction during that period.
There's only one fixed price for a stock on any given day using direct investment, so there's no way of knowing what exact price will be paid or received.
If an investor plans on holding a stock for several years, minor price changes will matter little, however. And many companies are getting faster, executing trades daily, once a week or every two weeks instead of once a month or, in some instances, every three months. Others are offering shareholders an 800 number if they want to sell.
But most companies stick to the slow lane.
"The speed on the buy and sell side is improving," Carlson said, and telephone services are superior to old rules that forced investors to send written instructions of a sell order.
One appeal of selling stock directly to investors is that those investors are more likely to become loyal, long-term shareholders who support management, says Robert O'Hara, marketing director for the National Association of Investors Corp. The non-profit NAIC runs a service that assists investors in buying stock from about 150 companies for $7 plus the cost of one share. The group says more than 400,000 investors have used the service in the past 10 years.
Pub Date: 2/16/97