Some big firms eschew splits aimed at luring more investors


When Yogi Berra, baseball's king of misguided logic, was asked by a waitress whether he wanted his pizza cut into four or eight slices, he responded:

"Better make it four. I don't think I can eat eight."

Stock splits are a lot like slicing pizza. Whenever a company splits its shares 2-for-1 or 3-for-1, the investor winds up with more shares, but the value of the investment isn't any greater.

Reasonably priced shares tend to attract more money from average investors, giving the stock a boost, but such results are not assured.

Some companies, however, couldn't care less about splitting their stock to attract more investors. They're happy with the investors they already have. With one Berkshire Hathaway "A" share recently costing more than $85,000, it isn't aimed at the little guy.

Here are Wall Street "high roller" stocks with hefty price tags:

Berkshire Hathaway "A" shares (BRKA) recently were more than $85,000 a share; Washington Post Co. (WPO) more than $830; NVR Inc. (NVR) more than $750; White Mountains Insurance Ltd. (WTM) more than $660; Markel Corp. (MKL) more than $340; Alleghany Corp. (Y) more than $275; Google Inc. "A" (GOOG) more than $260; Alexander's Inc. (ALX) more than $250; Chicago Mercantile Exchange Holdings Inc. "A" (CME) more than $210; and Student Loan Corp. (STU) more than $210.

"Some companies just don't give a hoot about how expensive their shares are and may not believe their investor base is affected," said David Ikenberry, chairman of the Finance Department at the University of Illinois at Urbana-Champaign. "However, the work that I've done suggests it is affected."

Companies with relatively low share prices tend to have more individual (retail) investors as shareholders, while those with higher prices have more of an institutional following, he said.

Some expensive companies such as Internet search engine Google and Chicago Mercantile Exchange Holdings are relatively young, Ikenberry noted, and therefore might not have enough confidence to establish a policy on splits.

"At companies such as Berkshire, Washington Post and Alleghany [the New York-based holding company for the Kirby family that is mostly in insurance], strong individuals at the top have chosen to keep the price up," said Steve Sanborn, research director for Value Line Inc. in New York. "Their managements pride themselves and their companies on being unique, and one way to do that is to keep the price up."

The goal of companies with strong insider control is long-term prosperity.

"Ownership of the Washington Post is a very exclusive club of investors, and I would definitely say there is a prestige factor in that stock price," said James Peters, equity analyst for Standard & Poor's Corp. in New York. "The general public isn't going to buy even 100 shares, and since it is not catering to that investor, it is hard to argue with its logic of not splitting."

The stocks of Berkshire and Washington Post are rated "sell" by S&P.; The analyst consensus on both from Thomson Financial is "hold."

The premium they're afforded by the market has been clouded by the possibilities that the Berkshire General Re insurance business exposure to regulatory investigations might escalate and that portions of the Post's business won't perform as well as its Kaplan education subsidiary has.

Meanwhile, homebuilder and mortgage company NVR in McLean, Va., which emerged from bankruptcy protection in 1993, enjoyed phenomenal growth in the housing boom of the past five years. It has 600 shareholders.

"NVR would say splitting its shares would simply create more paperwork and cost, and its stock is priced within the broad framework of its peers," said Gregory Gieber, vice president and homebuilding analyst for A.G. Edwards in St. Louis. "I have a 'hold' rating on its stock, which is because its growth in new contract signings over the last six months has been disappointing."

Andrew Leckey is a Tribune Media Services columnist.

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