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What is SUB DIVISION of shares ...........

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1What is SUB DIVISION of shares ........... Empty What is SUB DIVISION of shares ........... Wed Dec 30, 2015 11:44 am

vic19

vic19
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Question


What is a Subdivision?

Answer


A Subdivision is the opposite of a Consolidation with the number of shares in issue being increased by a set ratio. In turn the nominal value of the shares and the market price per share of the shares will decrease by the same ratio.
A company will split each ordinary share into a set number of new ordinary shares, for example a shareholder may receive 5 new ordinary shares for 1 existing ordinary share. The nominal value of the shares will also be adjusted and in a 5 for 1 subdivision, if the shares were ordinary 50p shares then they would become ordinary 10p shares.
The market price per share will decrease to reflect that each share is worth a smaller part of the company. For example, before the Subdivision each ordinary 50p share might have been worth £1.00, and after the 5 for 1 subdivision they would have a value of 20 pence (subject to normal market movements).


subdivision will bring down the nominal value of that share and increase the number of share in issue and hence increase the liquidity of that shares and make it affordable for small investors to buy and be a part of that company.

source: Barclays stock brokers UK

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