The Amazing $1,000/share Company


googlelogo2013With the Twitter initial public offering in the news, another prominent tech company, Google, made headlines when its stock price went up over $1,000 a share. That’s WAY higher than Microsoft (around $30 a share), almost double Apple’s price (around $520), and in fact is pretty much higher than any other stock’s price except one.

So is Google a far better company than just about everybody else? Share price doesn’t tell the whole story, and in this case it can be misleading. Google is unusual because for some reason it doesn’t do stock splits. Most companies give their investors two shares at half the current price each time their stock doubles in value–that is, when the stock price gets to $50, they trade you two shares for each one you own, and the price goes back down to $25. You have the same dollar value of the stock, but more shares. Thus, the actual share price tells you very little about the value or prospects of a company. Microsoft has split its stock nine times since going public in 1986: there were 2 for 1 splits in 1987, 1990, 1994, 1996, 1998, 1999 and 2003. The stock also had 3 for 2 splits in 1991 and 1992. Apple has offered three 2 for 1 splits: in 1987, 2000 and 2005.

A much better measure of a company’s worth is the total value of shares outstanding, also called the market cap. By that measure, Google is the third most valuable American-based company, at $344 billion, behind Apple ($475 billion) and Exxon Mobil ($394 billion), just ahead of Microsoft ($295 billion) and Berkshire Hathaway ($285 billion). Two of the three other companies with share prices over $1,000–pork processor Seaboard ($2,828) and Priceline ($1,048)–have far lower market caps, at $3 billion and $54 billion, respectively. By the way, the company with the highest price for a single share of its stock, by far and away, is Berkshire Hathaway. You can buy a share of its stock for a little over $173,000. Google has a ways to go to catch up.




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