Assets

4.5.2 Assets: 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.

Mclowd displays:

Assets_CorpActions_ConsolidateSplit

Enter the Record Date by selecting from the popup calendar.

Select the Asset from the assets list.

Mclowd displays the Assets Shares Data (purchase date, CGT date, volume and price per unit.)


NOTE: The below screen is for example purposes only. It is not intended to suggest that Woolworths executed a share consolidation or split on that date.


Assets_CorpActions_ConsolidateSplit_selectedWOW.PNG - Shortcut

Enter the Posting Date by selection from the popup calendar.

Enter the Ratio (number of new shares issued – ”Revised”) to number of shares cancelled (”Existing”).


NOTE:

In a Consolidation, Revised will be less than Existing.

In a Split, Revised will be more than existing.


Click VIEW REVISED ASSET DATA.

Assets_CorpActions_ConsolidateSplit_selected

Mclowd now displays the Asset record showing the adjusted volume of shares held and the new price per unit.

For a Consolidation, it will show a lesser Revised Volume and a higher Revised Price per Unit.

Assets_CorpActions_ConsolidateSplit_resultConsolidation

For a Split, it will show a greater Revised Volume and a lower Revised Price per Unit.

Assets_CorpActions_ConsolidateSplit_resultSplit

When you are satisfied that the data entered is correct, click SAVE.


about the author:

Lorraine Cobcroft

With a background in accounting and financial management, followed by two decades writing software documentation, Lorraine joined the Mclowd team in mid-2016 and is enjoying working with a dynamic team to enhance an innovative product that has the potential to revolutionize the way Australians manage their retirement funding.
Lorraine is also an accomplished business writer, ghost-writer, novelist and short-story writer and poet.

Leave a Reply