I know that in 1972 the holding company spun off the railroad into an ESOP, presumably because Heineman was convinced the railroad was a drag on the conglomerate he was building.
However, I don’t seem to know anything about how the ESOP fared after that. Was it the owner of the railroad, or a substantial owner of the road, clear up until the 1995 acquisition? How did the UP acquire the portion they owned prior to the acquisition? Did the employees gain substantially from the period of ESOP ownership? Did the ESOP manage to change to any degree the managment/labor cat fight that seem endemic to the industry?
I recall some posters saying that they wish they had bought more stock when they were CNW empoyees. To me, that says they sold them back to the company at a higher price?
I wish I had more details on the subject, but the C&NW Historical Society has a timeline summary of many of the railroad’s key events. Northwest Industries sold the railroad to the employees in 1972. Until 1982, only employees were allowed to buy any shares offered for sale. Perhaps someone here will know how a market is made for ESOP shares.
After that point, the shares were publicly traded. Those who made nice gains on the stock probably held on until the shares went public.
The 60-for-one split was much earlier in the life of employee-ownership than 1982. I first bought stock after that split (had I been able to afford to get in on it before the split, I would have made a killing!). In the late 70s, I believe, there was also a three-for-one split. The stock was listed on NASDAQ fairly early on; it later went to NYSE. It was about 1980 that the “employee-owned” appelation was dropped. Then there was the whold Japonica hostile-takeover thing that didn’t go through, which is why (I think) Blackstone and UP got their foot in the door. In 1995, when UP offered $55/share for all outstanding shares, I think CNW was trading in the 30s. Worked for me…
I didn’t think that stock splits changed the value of your stock holdings? If you had 100 share worth $50 each, and they split 2 for 1, didn’t you now own 200 stocks worth $25 each?
Right, but any increase in the stock’s value makes the worth of your shares that much higher.
Say you have 100 stocks at $10 each- $1000 worth.
The stock splits 2:1, so you now have 200 stocks at $5 each.
Over time the stock can appreciate in value, so you may very well end up with 200 stocks at $10 each.
True in most cases (including the three-for-one split), but it wasn’t true in the 60-for-one split. I can’t remember the figures, but the value of the holdings for those lucky folks was multiplied substantially.
Part of the reason for a stock split is to expand the pool of potential buyers. Suppose that before the 60-1 split a CNW share was trading at $600. The cost of buying a 100 share block would be $60,000. (Buying an odd lot of less than 100 shares through normal trade arrangements usually involves higher transaction fees.) In the short time after the split, the stock would trade around $10 so a block could be acquired for about $1000, the lower amount being more in the range of dollars available to a small investor.
Over time, the $10 stocks could appreciate in value as well, so you could very well end up with 100 stocks at $20 each. I guess what I’m saying is, your holdings have the same value the instant before the split, than they do the instant after the split. Splitting the sock 2 for 1, 3 for 1, or 60 for 1, doesn’t change the value of your holdings. I know a lot of people who think a stock split instantly doubles their money. I don’t think so.
As I said, Murph, the 60-for-1 split was a special instance. I can’t remember the exact figures, and I know that the early shareholders didn’t gain sixtyfold, but they did have the value of their holdings increased at the instant of the split–and substantially; I think it was like 11 times, based on par value of the stock (keep in mind that stock was not actually being traded at this point).
Sometimes Murphy companies split their stock to make the shares more tradeable on the market, if prices become too high it limits the ability of the stock to trade. An example of this Warren Buffett’s Berkshire Hathaway which closed today at $139,000 off $700 for the day. It is impossible for a small investor to hold this stock, its significantly harder to trade stocks in increments of less than 100 shares, 100 shares of Berkshire Hathaway will set you back $13.9 million dollars. And if you had owned 100 shares this morning you would have had a loss of $70,000 for the day. Of course for Warren it’s pocket change.