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Q:

Does ASA have a policy on share splits for stocks which have a face value of more than, say, $20?

For Example: Commonwealth Bank is usually over $70. It has 14.5 million shares on issue, and 14,725 shareholders. 94% of those shareholders have a holding of 10,000 shares or less, and hold 56.4% of the shares. 84% of all shareholders have a holding of 1,000 shares or less, and hold 29% of the total. If CBA had a stock split of, say, 3.5 for 1 when the quoted prices is $70, the nominal price of each share would become $20 and a holding of 200 shares would become 700. The individual shares would become far more marketable at the lower price. Small shareholders would benefit much more from the dividend reinvestment plan in terms of numbers of shares to increase their total holding. Small holdings would become more liquid. On top of all this, experience has shown that stock splits lead to a relatively GREATER increase in unit value than without the stock split. It is a very common reward for shareholders in the USA instead of an increase in the dividend rate. So, I believe that when a stock has a higher than average unit price, a stock split would benefit all small shareholders and should be advocated by ASA when liaising with Company Boards and reported on by all relevant company monitors.

Ian Maxwell

1 Answer

Hi Ian

Sorry for the delayed response. We don't have a policy position on this issue however it is something we will consider for next year.

Regards
Anna