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Why do some huge companies have such low stock prices?

Why do some great and well known companies that sell a lot of products and services have a lower stock price than other less profitable companies? For example, Apple, the most valuable company in the world, has a stock price of around $120 while Berkshire Hathaway has a stock price of over $200,000. Why is that?

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February 2017

This is a great question, and Berkshire is a good example to illustrate. Berkshire has two "stocks," or share classes. There's Berkshire A shares (Brk.a), with a current share price closing in on $250K, and Berkshire B shares(Brk.b), around $160/share. Big difference in price, but the underlying assets, or the companies held by Berkshire A and B shares, are the same. The same companies are held, but one is a fraction in price of the other. That's because the number of shares outstanding are significantly different. You would have to hold roughly 1,500 shares of the B class to equal an A share, but if you did, they would be equivalent. Berkshire Hathaway created these shares in order for smaller investors to have access to the stock.

Likewise, Apple could have a stock in the thousands, but they "split" the shares, in order for smaller investors to get in on the action. At some point, the shares got too expensive, and so they split them up. If you held 100 shares of Apple at $200, maybe you now hold 200 shares at $100. It doesn't change your holdings, but it does allow someone who can't afford $200 shares to purchase them at $100. Sometimes, companies do this because the price has grown prohibitive for many investors, like Amazon's current share price of $800. Companies can also do a reverse split, which is the opposite. Raising the price of a stock by merging shares to create less outstanding shares available to have the appearance of a more valuable stock.

February 2017
February 2017
February 2017
February 2017