ROSIE MURRAY-WEST, FINANCIAL MAIL ON SUNDAY, 3 April 2022:
You would think that a rising share price could only be good news for a company and its shareholders. But not always. In some cases shares can get so costly that it is difficult for new investors to buy in…
To counter the problem of rocketing prices, companies sometimes carry out a share split, which means slicing each share into smaller bite-size pieces…
In the UK, investment trust Temple Bar is planning a five-for-one share split next month. Shares are currently trading at £11.60 so at this rate the new shares would cost around £2.32.
What does it mean for existing investors?
A share split cannot take place until it has been approved by shareholders. Even then, it can take some weeks or even months to get the go-ahead.
Investors who hold shares on an online platform will not notice any difference as the value of their holdings should not change. However, anyone who holds shares directly may wonder what is going on…
How do shareholders benefit from the split?
New investors may find that a lower price makes buying shares more affordable. But a share split can also be good news for existing shareholders.
Many investors like to grow their wealth by reinvesting dividends they receive from their holdings to buy new shares. However, this is out of the question when the share price is particularly high…
James Carthew, head of investment companies at financial information group QuotedData, adds that one of the trusts he holds in his own investment portfolio – Personal Assets – has a high share price (just below £504). It means he does not reinvest his dividends.
He adds: ‘Investors might reasonably want to tick a box to say ‘please reinvest my dividends’ but with the share price that high it just doesn’t work. I take my dividend as cash and invest it in other shares – Personal Assets loses out as a result.’
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