On this day in economic and business history ...
Two months after its formation in one of the landmark mergers of the era, General Electric (NYSE: GE ) stock was traded on public markets for the first time, on June 23, 1892. That day, a single trade of 50 shares set a first-day closing price for GE at $108. Four years later, GE became a founding member of the Dow Jones Industrial Average (DJINDICES: ^DJI ) . One of those shares grew into 4,608 shares 110 years later, with a total value of $91,285 -- anyone holding a first-day share today would have earned an annual return of 6.3%, not counting the substantial dividend returns, which have flowed for every quarter of GE's existence since 1899. That consistency has helped to make GE the Dow's longest-tenured component, as it's the only component that can claim more than a century of consecutive membership.
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Changing the rules for investment banking
Storied brokerage firm Merrill Lynch went public to great fanfare on June 23, 1971. It was at the time the world's largest investment house, and as such its IPO was widely considered to be a watershed moment in the brokerage and investment-banking industry. The excitement was confirmed when Merrill's shares shot up from a $28 offer price to an intraday high of $40 per share, before ending the day at $37.75 for a first-day pop of 35%.
Merrill had been founded in 1914, so why did it wait decades to go public? The answer involves the New York Stock Exchange -- now part of NYSE Euronext (NYSE: NYX ) -- which underwent many rule changes during the '60s and '70s. A long-standing rule prohibiting NYSE member firms (typically broker-dealers) from operating as joint-stock corporations was loosened in 1970. Following this change, a number of member firms -- but not the majority -- wound up going public to take advantage of fresh capital.
Merrill was the second notable member firm to go public after Donaldson, Lufkin, and Jenrette, but it was the first marquee name to be traded. Merrill's IPO, which raised about $112 million -- half that for corporate use, and the other for insiders -- was in part a rush to finance the expansion of the firm in the early days of computerized trading, as the company's high-volume retail operations made ideal use of the costly new technology. It's likely that Merrill would have gone public earlier. The firm was unusually transparent by Wall Street standards, as it had actually been providing the public with annual financial reports since 1940. However, the firm's rapid expansion became a competitive advantage in the early years of the retail-investing boom, and the IPO certainly furthered that expansion.
Unfortunately for Merrill, its good fortunes would run out several decades later, during the subprime-driven financial crisis. It is now a part of Bank of America (NYSE: BAC ) , which assumed billions of dollars of questionable Merrill debts in a 2008 acquisition.
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