What if all companies were close to as expensive in price as Berkshire?

Question

I was thinking if nobody had a stock split that would happen more right? Also when you had your IPO you could make a fewer number of shares so the stock price was really expensive like 10,000 dollars a share. Would this ever happen? Why or why not?

Answer 1

Hi,

interesting question.

Well it would not happen. When a company makes an IPO is to rise up a lot of money for making investments or to fullfill main shareholders' pokets. If you put a sell price of 10,000 you'll have less demand on the stock markets, that means that th price won't go up very fast 'demand and offer law'.

In order to have a market which is liquid, so with possibility to buy and sell quite easily you have to put in the market a lot of stocks with a price that mass people can buy.

There is a non politically correct answer too: normally the Stock Exchange is helpfult to transfer money from the people (crowd of little investors) to the big master investors and top players of invstment banks. So, if you put a price that only big players can affords, the battle would be very hard for them and they'll start killing each other. It is much more easy to drain mass resources.

I know it's an hard explanation, but finance is this too.

Berkshire and other few company are a particular case. It's the representation of his great Master philosophy. Long term and value investing policy of Buffet it's perfectly represented in his creature. He has no interest to split its company in little pieces, he wants to protect himself by the speculation, but this is a rare case. It will always be the exception!

Answer 2

Yeah = AS IF ...

What if the Sun was green ? or the Moon was made of cheese ?

Look up 'liquidity' .. and then consider what would happen if shares were harder to sell .. i.e. too expensive for the mass-market buyers to afford...

Answer 3

That's a bit IF, not very realistic.

This would never happen, people are too greedy to let

Someone would always be willing to sell or buy something for less, that's what makes the market

Answer 4

Your just a cub, 'what ifs' are nice to think about but they don't bare out in the real world.