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Corporate actions – consolidation / split
A Share Split typically involves a company distributing to shareholders n new shares for each share they currently hold. This increases the total number of shares on issue, while decreasing the value of each share. Unlike bonus share issues, Share Splits do not substitute for dividend payments and do not typically increase the total value of your shareholding. The overall market capitalisation of the company remains unchanged, but the market price per share falls. Reducing the share price improves market liquidity and broadens the company’s shareholder base by making shares more affordable for retail investors.
Share Consolidations are precisely the reverse of a Share Split. To reduce the total number of shares on issue and increase the market value of each share, a company may cancel your shares and issue ”consolidated” shares in a ratio of 0.nn per share currently held. Like a Share Split, Consolidation has no effect on the value of an individual’s shareholding relative to the total market value of the company. A consolidation may, however, enable investment by larger institutional investors who will only invest when the share price exceeds their preferred minimum. Consolidations also enable companies to meet the minimum trading bid size for a stock market listing.
To record an issue of new shares via a share split or consolidation, click CORPORATE ACTIONS on the ASSETS menu, then CONSOLIDATION/SPLIT.
The following will be displayed.
Note – the below screens are for example purposes only. It is not intended to suggest that a consolidation or split of Woolworths shares occurred on the dates shown (or at any time).
The asset record is now displayed with the adjusted volume of shares held and the new price per unit.