Why would a stock that is below 11.00 split? RE: WTRS. (May 21, 2002)
WTRS announced a 3:2 split with a stock price just below $11. One of the ways a stock can make strong moves higher is to attract institutional investors. Institutions buy large blocks of stock in order to be efficient. If a company does not have adequate float, institutions cannot buy that stock even if they like the company. All that will do is drive the price higher on the buying, and once that is done there is no other buying that can come in and drive it further. So, a company such as WTRS may want to increase its float. One way to do that is to split the stock. Now WTRS split 3 for 2; you would think it would split 2 for 1 to get more shares outstanding if this was its goal. You also have to consider price. Many funds cannot own stocks less than $10 or $15. It does not want to split its stock down too far as then it might take quite a long time to reach that dollar threshold. We have not contacted WTRS as to their reasoning, but we do know that companies with small floats that want to get on the radar screens of institutions will split their shares at a lower value in order get the float up and then maybe get the attention of some big money investors.
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