1 Share Can Be Big Investment in Europe : Finance: Commoners often cannot afford stock in many companies. Drug maker Roche Holding AG sells for $6,894 a pop.
In Europe, share prices come in all sizes, and in many cases that means too big to buy for the individual investor.
Shares with the highest price hurdles are in Switzerland, where wealthy families and commercial banks account for no less than half of all stock ownership. Food maker Nestle SA’s shares, for example, sell for 1,174 francs, or $1,024.
Across Europe, shares of household names sell for prices that hamper their popularity with the everyday Francois on the street. One Daimler-Benz AG share sells for 681.5 marks, or $491--about the cost of tuning a Mercedes-Benz, oil change and all.
One of drug maker Roche Holding AG’s shares sells for $6,894, making it the highest-priced stock in Switzerland’s SMI Index. Carrefour Supermarche ($578) in France, Bayer AG ($270) in Germany and Novo-Nordisk A/S ($116) in Denmark are typical share prices in their respective markets.
“These are all psychological barriers,” said David Jones, chief executive of ShareLink Investment Services Plc, the discount brokerage that handles 6% of all transactions on the London Stock Exchange. “In some cases, there is an actual financial penalty if you don’t have the money to buy just one share. These are seen as stocks for rich people.”
Several European countries sport exorbitant share prices.
The average share price in Switzerland’s 21-share SMI Index is 1,403 Swiss francs, or $1,225. The potent Swiss franc boosts the dollar average. France’s 40 CAC Index shares average 558 francs, or $116.66.
The average in Germany’s 30-share DAX Index: 450 marks, or $325. Seven companies in the DAX, including profitable software maker SAP AG this week, have pared stock values through stock splits. By making single shares less expensive, splits theoretically enable more individual investors to buy shares.
The jury is out on whether lower prices--as much as a tenth of what they used to be in SAP’s case--will attract commoners to big companies or boost share prices.
Coming down to earth, Amsterdam’s EOE Index of 25 shares averages 96.4 Dutch guilders, or $62 a share. The average for the Dow Jones Industrial Average of 30 U.S. shares, regarded as the world’s most consumer-friendly basket of stocks, is $55.66.
It is only in Italy and Spain, where weak currencies keep shares affordable--and in Britain, where widespread individual share ownership is considered desirable--that average share prices become reasonable.
In Spain’s IBEX Index of 35 shares, the average is 4,291 pesetas, or $36.20. In London, the average for the FT-SE 100 Index is 535 pence, or $3.33.
Aside from a profitable company’s rising prospects, lofty share prices can stem from executives’ concern about mailing reports and taking phone calls from thousands of individual shareholders.
Powergen Plc Chief Executive Edmund A. Wallis at a press conference moaned about the rising cost of serving the British electricity generator’s smallest shareholders. Wallis complained for all to hear.
Others lament behind closed doors.
“Many company chiefs are hypocritical, saying in public they welcome private investors, then complaining in private to their financial directors about the costs of servicing individuals,” said ShareLink’s Jones. “I’ve been in on these meetings and heard them.”
Jones said slimmer European share prices through stock splits go hand-in-hand with investors’ demands for more financial information. Germany’s Daimler-Benz and other European companies, after selling shares as American Depositary Receipts in the U.S., now unveil profits or losses four times a year, not twice. European securities regularities generally require only half-year reports.
European executives who mull the proposition of a stock split must balance higher administrative costs with the benefits of wider shareholder ownership. Those benefits are hazy.
CS Holding, Swiss parent of Credit Suisse, divided each share five ways in December, 1993. The shares were changing hands at the time for 3,375 Swiss francs each, or $2,327 each.
They now change hands for 101 francs, or $88 each, making them the lowest-priced shares in Switzerland’s SMI Index. Has this helped the share price?
Well, CS Holding shares almost doubled during 1993. The year ended with the division of the banking company’s shares. Since then, CS Holding shares have lost 40 percent of their value.
A SAP share in Germany sold for 2,200 marks ($1,585) earlier this month. After dividing 10 ways, a share sold for 228 marks ($164.32)--a gain of 3.6% from the old price.
“Obviously, it’s catching on,” said Tom Miskell of Societe Generale Strauss Turnbull Securities Ltd. in London. “Whether or not it’s actually working is another matter. I’ve yet to see any figures to show me that more [individual] investors are getting in the game, which is the whole point.”
