Wednesday, May 12, 2010

It's Splitsville for Baidu (BIDU)

Wow! I just looked at the price for Baidu (BIDU), the China version of Google.

The indicator said that it went up, but the price was below $100/share.

Eventually, I figured what happened.


THIS STOCK PRICE SPLIT 10:1.

That means if you owned 50 shares of it, you now own 500 shares.

This was a good decision, as the price was over $700/share, which scared a lot of buyers from getting it. Its price would bounce 20-40 points regularly within a one day trading period.

Now, it's going up by over 7 points, which is like going up 70 points by the old scale. Going up 70 points scared people, but 7 points makes them smirk.

It's crazy, because there really isn't any mathematical difference, but the stock market is just a referendum of people's opinions of value, anyway. That's why it's so important that Baidu "reduced" their stock price.

People will buy more of this, even though it is trading at a really high price compared to the amount of its earnings.

It's splitsville for Baidu, and it's going to take it to the top a lot more quickly.

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