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  • midnightrambler108 midnightrambler108 Jul 25, 2011 2:58 PM Flag

    The Fear Of Large Numbers

    I see a big motsaball in the $370 Billion Market Cap

    That's too big...

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    • The float # is irrelevant compared to the earnings and growth, but the pricing after a big split would vastly increase the pool of potential ownership, which is very relevant, as is the perception in the media that Apple is too pricey because, OMG, it is $300 or $400 and that is soooo much money for one share...

      • 2 Replies to falconarm
      • Perform a thought experiment to quantify how much you mean by "vastly". You don't have to be right, just pick some numbers for example to see whether they shed any light on the prospects. For example...

        Suppose 10,000 new people per day are brought into AAPL because of this split psychology effect. Suppose that they each buy $4000 worth of AAPL. That works out to an additional $40 million dollars per day in the AAPL marketplace. (I know that there will be nonlinear effects, and oversimplifying like this is not accurate, but I think we can still learn something from it.)

        According to Yahoo, AAPL has been averaging about 15 million shares per day, and the price is at $400, which results in a daily dollar volume of 6 billion. So according to the above assumptions, the dollar volume increase is 40 million divided by 6 billion = two thirds of one percent. This doesn't seem like a sufficient enough difference to drive a value increase. The bottom line is that AAPL's current marketplace is already enormous, almost beyond comprehension. These people are slinging nearly a thousand shares per second on a big volume day, and they don't care how the shares are packaged. They are working from a specific amount of $$$ they want to put at risk, and they'll get whatever number of shares it takes to tally that.

        Now, it is fair to use your own inputs. Perhaps more people than 10000 will get drawn into the marketplace (every day!) and/or perhaps such people will invest more than $4000 on average. Perhaps it really will have the effect people suggest.

        But this is food for thought and discussion.


      • BTW, splits are not unknown for Apple, was management foolish then given the price we see now...?

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