Is a share split good or bad?

[56gsa]

A question - I have WHG shares which have been good - was thinking of reducing my holding but company announced they will do 3 for 1 share split to improve liquidity. Current price is around $5.90 so shares will presumably be around $2 ..

does a share split have the desired impact and increase the price relatively?

is there initial demand that then tappers of so good to sell just after split?

or does the share price fall relatively?

not looking for advice - just your experience or examples you can point to...

thanks

 

[Knobby22]

I don't think a share split achieves anything especially at that price.
I don't know why companies do them.

 

[Realist]

In theory it does nothing.

In reality the price increases slightly I think.

My experience is with Nasdaq shares... They did well of course (until 2000 )

 

[michael_selway]

In theory it does nothing.

In reality the price increases slightly I think.

My experience is with Nasdaq shares... They did well of course (until 2000 )

also the company wastes money when they do a share split?

thx

MS

 

[Ko Ko]

A share split normally occurs when shares get to a price were they starting to get to expensive and investors are less willing to invest. So to make the share price seem more attractive they split one share into 2. So really you are holding twice the amount of shares u have with half the price. In theory it should not effect share price at all. It doesnt effect owners equity account at all. Just the number of issued shares.

Ko Ko

 

[markrmau]

starting to get to expensive and investors are less willing to invest

Totally irrational of course, but this is even what the companies put out.

eg. BMN are saying the shares are to expensive at $1.50 and are doing a 3:1 split. Are they really saying that investors can't pay $1.50 for one share when brokerage is min 20-30$ ???

Berkshire Hathway A on the other hand, could possibly benefit from a 10,000:1 split

 

[krisbarry]

Share splits also occur when a company issues too many shares and the share price stays low, as was the case with MXA (now LVL).

They went the opposite and consolidated 10:1

563,000,000 MXA shares converted to 56,300,000 shares

So the share price went from 2 cents to 20 cents

But at the same time the amount of shares I owned went down by 10 times, so in real terms nothing changed except for the fact that less shares on offer makes the price move up or down at a more rapid rate.

 

[56gsa]

Thanks for your comments

Seems no logic in the reason to split -- after all you buy so many $$s worth of shares no matter what the price per share - I wonder in WHG's case if they are looking at their main competitor (COU) whose shares are around $2.30 - maybe they want to benchmark against them.... who knows - might stay for the ride and see what happens

cheers

 

[michael_selway]

A share split normally occurs when shares get to a price were they starting to get to expensive and investors are less willing to invest. So to make the share price seem more attractive they split one share into 2. So really you are holding twice the amount of shares u have with half the price. In theory it should not effect share price at all. It doesnt effect owners equity account at all. Just the number of issued shares.

Ko Ko

Bascially its all about EPS and P/E, where they should stay the same before and after the split (How much people are willing to pay max now)

Its just that the Technical Analysis people might get "induced" into the sudden "fall" or "rise" in the share price?

thx

MS