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Time for splits
Valued Contributor

Time for splits

splits.jpg

 

Naspers is closing in on R4,000 and Capitec* is closing in on R1,000 and they are the two most expensive priced stocks on the JSE. Is it time for the respective listings to consider a share split?

For example, if you hold 100 CPI shares at R1,000 and they split 1:10 you’d now hold 1,000 shares at R100. Same value so, no change but the theory is improved liquidity and price discovery?

Way back in the day you could only really trade shares in 100 share lots, so actual price was important. But these days you can buy just a single share if you want (cost issues aside). So, it’s not needed and the trend of the early 2000’s for share splits has faded away. But I do think eventually these two will do a split and here’s the rub – always be long a share split. A share split boosts price, sure maybe it is not logical but that’s what we’ve always seen.

Share consolidations is the other side of the coin for when share prices get down in the dumps.

Example here is you own 1,000 shares at 10c so they consolidate 10:1 and you end up with 100 shares at 100c each. The trade here is always short consolidations, the price was weak but struggled to truly effect price discovery. Now there is better price discovery and almost always that discovery leads to weaker share price.

Simon

* the writer holds shares in Capitec

6 Comments
Occasional Contributor
I see Standard Bank has released a Target Price report for Naspers at 5500. Any thoughts on that?
Frequent Contributor

Simon but where consolidations inprove tradeablity and are indicating  a likely narrowing of the NAV gap - which is I understand is part of the reason for ending the REI depositary receipts  - then a long position is indicated?  

Valued Contributor

@Blik2

Sure why not, Tencent is a machine and NPN still trding at discount to the stake.

 

@partridge1

Ya, always the occasionl exception.

Contributor

Is Naspers about to cut out?

Occasional Contributor
Antenna. I am trying to trade Naspers purely on price. I am only going long on my NPN trades. And until is crosses above the 26-day EMA, its off my radar. Far better investors/traders on the forum will be able to advise better.
Contributor

Im not sure what to make of this investigation in the US... I think I have not been following this enough