Disney Shares Math Question

[mikelan6]

OK, so I am not the best at math here and wanted some help. I am trying to figure out the value of some Disney shares.

Here is the question:

Lets say I had purchased 100 Disney shares back in the 1980's. The value of that was about $1.00 per share, so about $100.00.

In 1997, they had a 3 for 1 stock split, so my 100 shares became 300 shares. The value of the stock then was $111.00 per share. According to the statement that Disney sent me, they "gave" me 200 shares for free.

I'm trying to figure out my cost of those 200 shares.

Please help!!!!!!

 

[eeyorethegreat]

Ok I am by far not a math whiz or even close. But I found your question interesting. SO I will love to hear the input on some one who does understand math concepts (unlike me) . I did have a question to your question though. Do you mean "what is the VALUE" of the shares considering the spilt? As in what would the value of the share be if you sold those 200 shares?

I am not always an out of the box thinker but this is my weak understanding of stocks. The stocks you bought for $1.00 each at a point in the past, do not stay valued at that $1.00 but rather increase or decrease in value as the price on the stock market fluctuates. Those $1.00 stocks became more valuable likely reaching their peak of value just before the stock split. Splits lower the price aka value of the individual stocks in turn you got in this scenario two stocks for every one stock that you originally had. Assuming that you only bought the original stocks and added no more you could go by the idea that you had 100 and got 200 free at no cost to you. But I think you mean what is the value of them at the original price ) $1.00 each. So I would think you would divide the original value by a third which would mean that had you bought the stocks all 300 of them at the same time, taking into consideration that each stock is worth a third of what you paid then each stock would have been worth 33.3cents. (Three stocks to the original dollar). But now regardless of how many stocks you have or originally bought each stock is worth $111 regardless of how you came to have them in your account (by buying or splitting).

Now I will sit back and let someone who really knows that they are talking about answer and correct my math and thought process LOL!

 

[mainegal]

OK, so I am not the best at math here and wanted some help. I am trying to figure out the value of some Disney shares.

Here is the question:

Lets say I had purchased 100 Disney shares back in the 1980's. The value of that was about $1.00 per share, so about $100.00.

In 1997, they had a 3 for 1 stock split, so my 100 shares became 300 shares. The value of the stock then was $111.00 per share. According to the statement that Disney sent me, they "gave" me 200 shares for free.

I'm trying to figure out my cost of those 200 shares.

Please help!!!!!!

My short answer would be that Disney did not give you 200 shares. They devalued their stock so they could sell more and raise more money.

Each share is worth one third now. Instead of $1.00/share it would be .33/share. Make sense?

My friend bought the one share of stock in a frame when he had interest in the stocksmarket. He got bored with it and sold it to me for (I think) $75. After the split, each share had a value of $25-$30. (I don't remember) Disney stock is today $42.42 / share. Up from my original cost.

 

[shmedly123]

OK, so I am not the best at math here and wanted some help. I am trying to figure out the value of some Disney shares.

Here is the question:

Lets say I had purchased 100 Disney shares back in the 1980's. The value of that was about $1.00 per share, so about $100.00.

In 1997, they had a 3 for 1 stock split, so my 100 shares became 300 shares. The value of the stock then was $111.00 per share. According to the statement that Disney sent me, they "gave" me 200 shares for free.

I'm trying to figure out my cost of those 200 shares.

Please help!!!!!!

my answer is similar to pp's but I will work with some assumptions based on the numbers...

In order for you to receive the 200 "free" shares you had to have 100 shares which you purchased at $100. The 200 shares are 200/300 or 2/3's of YOUR investment...so those 200 shares "cost" you $67.67


If you are wondering what the perceived value of the "free" shares are, the minute the 3 for 1 split (say at $111 per share) happens you now have 3x as many stocks but your stocks are worth 1/3 (or $37) what they were before the split.

i.e. before the split you had 1s = 111 so s = 111
after the split 3s = 111 so s=111/3 or 37 per share so

37 * 200 = $7,400

your total value of the stock would have been $11,100 both immediately before and after the split. SO the $7,400 is really just 2/3 of that amount.

The real advantage is now when the price goes up $1 a share your value goes up $300 instead of $100, but the market is now diluted so all things being equal the share price would climb slower than before the split.

 

[doconeill]

I'd differentiate things by defining cost vs. investment.

By giving you something for "free", your cost is $0. I assume you didn't have to pay any sort of fee when they split (I'm nut a stock trader myself, but I'm pretty sure you don't). So, your cost for the additions shares is $0.

However, your investment in the total number of shares you now own is still $100. So the per-share investment cost would be $0.33333333...

 

[elemusing]

My head hurts.

This is the same feeling I get when I sit down with my Ed Jones guy. I think I am really smart until he starts talking.