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Do share splits or consolidation significating change stock performance?

  • 15-07-2016 2:39pm
    #1
    BrokenArrows
    Registered Users, Registered Users 2 Posts: 7,501 ✭✭✭


    There are some simple reasons why a company may want to split or consilidate their stock.
    Im just curious what peoples opinions are regarding the short term and long term effect of a stock split or consolidation.

    The reason im asking is i have shares in a company who in august is going to issue a ~12% special dividend and perform a share consolidation.

    So in theory the stock price should drop 12% and be accompanied by a stock consolidation of what will be a price maintenance change of 1:0.88

    Do markets react in any strange way?


Comments

  • #2
    Nody
    Moderators, Category Moderators, Arts Moderators, Business & Finance Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 18,375 CMod ✭✭✭✭Nody


    Well depends on the reason; for example cent priced stock see huge fluctuations in percentage with 1c change in price and in such cases a consolidation can help if the company has turned things around. Splits are in general more positive as they are split due to getting to a high price individually and by splitting the idea is the stock will become more fluid again and sometimes people will be caught by surprised (i.e. long buy orders and the like) which can work in your favor.


  • #3
    BrokenArrows
    Registered Users, Registered Users 2 Posts: 7,501 ✭✭✭BrokenArrows


    Yes I understand the reasoning for penny stocks but why would a company care to make a 12% consolidation? The share is trading at 557pence so I just don't see the point apart from giving the illusion to the unobservant investor that the price hasn't changed.


  • #4
    Cute Hoor
    Registered Users, Registered Users 2 Posts: 1,788 ✭✭✭Cute Hoor


    BrokenArrows wrote: »
    Yes I understand the reasoning for penny stocks but why would a company care to make a 12% consolidation? The share is trading at 557pence so I just don't see the point apart from giving the illusion to the unobservant investor that the price hasn't changed.

    They did this share split/special dividend last year as well, I don't think it went too well for the shareholders, as far as I can remember the special dividend didn't cover the share split loss. There was probably a good run up in share price in anticipation of the special dividend so it's not easy to work out, the same will probably happen this year. Not sure of the reasoning behind this or the benefit to the shareholders.


  • #5
    BrokenArrows
    Registered Users, Registered Users 2 Posts: 7,501 ✭✭✭BrokenArrows


    The company i was asking this about is Intermediate Capital Group.

    The ex-dividend date was today.
    The share consolidation was today.

    Something just popped into my head right now. The dividend is 63.4p per share.

    Is this dividend per consolidated or unconsolidated share count? I've read through the company announcements etc and nothing specified whether the dividend would be issued on the old or new share count.

    Any ideas?


  • #6
    BrokenArrows
    Registered Users, Registered Users 2 Posts: 7,501 ✭✭✭BrokenArrows


    Cute Hoor wrote: »
    They did this share split/special dividend last year as well, I don't think it went too well for the shareholders, as far as I can remember the special dividend didn't cover the share split loss. There was probably a good run up in share price in anticipation of the special dividend so it's not easy to work out, the same will probably happen this year. Not sure of the reasoning behind this or the benefit to the shareholders.

    Well it worked out this time.
    They performed the split putting the price at 622p, issued the 11.5% dividend and the stock has risen back about 6% after the initial 11.5% drop.

    So a nice payout overall.


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