Bats CEO sounds off on Wall Street’s high share prices
This article first appeared in The New York Post
The Bats CEO is going ape over today’s market drought.
The No. 2 US stock exchange by market share has thrown down the gauntlet to companies that refuse to split their pricey stocks.
And in a hell-raising newsletter — the first since the initial public offering in April — Bats Chief Executive Chris Concannon takes no prisoners.
Concannon even needles archrival New York Stock Exchange, declaring that NYSE owner ICE, “which trades close to $270 per share, could offer a stock split to send a signal to corporate America.”
Recent market rallies notwithstanding, low trading volume is causing Concannon’s blood to boil and cutting into his top line. Contributing to this comparative trading trickle, he says, is a dearth of stock splits.
“In an ill-conceived effort to attract ‘long-term investors’ and detract ‘speculators’ from trading in their stocks, a number of popular US companies have kept their nominal stock prices above $200, $500 or even $1,000 per share,” said Concannon, while Bats itself trades south of $30.
“While intended to attract buy-and-hold investors,” he added, “these higher nominal stock prices can actually negatively impact liquidity, trading costs and investor participation, affecting returns and the value of equity holdings for investors.”
In all, Concannon says, 44 US companies’ securities trade above $200 today, among them Amazon and Google, both in the $700s.
Not only would a surge of stock splits fuel more volume, he claims, but the splits would also help structural issues tied to “ultra high-priced” stocks.
“These securities increase the cost of execution for both large and small investors by widening bidoffer spreads… Of the top 10 US stocks by market capitalization, spreads can be as much as five times greater on a percent basis than their lower-priced counterparts,” Concannon said.
Concannon also believes that failure to split big stocks keeps small investors away. This is a refusal to embrace middle-class investors with less wealth, he says. Only about 14 percent of US investors directly own stock, with 50 percent owning stocks through mutual funds and other channels.
The changes were made to better reflect the evolving nature and spirit of the company.
Lots going on in the world, but equity markets stay quiet.