Earlier this week, US tech giants Apple (NDQ:APPL) and Tesla (NDQ:TSLA) conducted stock splits, and they’re not alone.

A stock split involves increasing the company’s shares on issue. While leaving shareholders with a similar total value of shares they now have a higher number.

Shareholders in Tesla were given five new shares for every one they held while Apple offered its holders four for one.

This is the first time that Tesla has split its shares, but the fifth time for Apple.

 

Splitting stocks makes shares more affordable for investors

Both companies justified their moves by stating they wanted shares to be more affordable or accessible to a broader range of investors.

Barclay Pearce Capital analyst Aran Anandakumar says that is the main reason companies undertake a share split.

“Companies usually split their stocks once they perceive the share price has grown ‘too expensive’ for mainstream investors,” he told Stockhead.

“The lower share price makes it more attractive to investors who can’t afford the higher share price, but still want to invest in the company.

“Think of Berkshire Hathaway, trading at around $320,000/share because it has never split. An average investor with $50,000 to invest wouldn’t even be able to buy a single share.”

Anandakumar said it could also be perceived as a sign of confidence that a company expects demand for its shares.

 

Has anyone on the ASX split stocks?

So far this year, no ASX-listed stocks have undertaken a share split, but over 30 have done the opposite — consolidated their shares.

Here’s a summary of the ASX stocks that have done stock consolidations in 2020:

Scroll or swipe to reveal table. Click headings to sort.

Effective Date Code Company Amount
13/3/20 PFT Pure Foods Tasmania Ltd 1 for 10
15/1/20 TTB Total Brain Ltd 1 for 10
2/3/20 AVR Anteris Technologies Ltd 1 for 100
4/3/20 SUV Suvo Strategic Minerals Ltd 1 for 10
20/2/20 OBJ OBJ Ltd 1 for 20
10/3/20 TRL Tanga Resources Ltd 1 for 20
25/3/20 EMR Emerald Resources NL 1 for 10
31/3/20 BPH BPH Energy Ltd 1 for 10
7/4/20 VOR Vortiv Ltd 1 for 20
2/4/20 CTM Centaurus Metals Ltd 1 for 15
10/3/20 VP7 Velocity Property Group Ltd 1 for 35
31/3/20 SUP Superior Lake Resources Ltd 1 for 10
15/4/20 CIO Connected IO Ltd 1 for 10
27/5/20 GLV Global Oil & Gas Ltd 1 for 12
22/4/20 MAR Malachite Resources Ltd 1 for 100
17/4/20 LRK Lark Distilling Co Ltd 1 for 30
16/4/20 STK Strickland Metals Ltd 1 for 10
23/6/20 ORA Orora Ltd 4 for 5
1/6/20 GTE Great Western Exploration Ltd 1 for 60
5/6/20 WMX Wiluna Mining Corp Ltd 1 for 100
28/7/20 WRM White Rock Minerals Ltd 1 for 100
16/6/20 AWN AWN Holdings Ltd 1 for 4
14/7/20 PRM Prominence Energy Ltd 1 for 10
22/6/20 ENV Enova Mining Ltd 1 for 5
10/7/20 ESS Essential Metals Ltd 1 for 10
19/8/20 ZIP ZipTel Ltd 11 for 20
27/8/20 ICGDA Inca Minerals Ltd 1 for 20
3/9/20 RE1 Resa Group Ltd 19 for 20
21/9/20 GCY Gascoyne Resources Ltd 1 for 20
26/8/20 SERDA Strategic Energy Resources Ltd 1 for 10
8/10/20 VEA Viva Energy Group Ltd 21 for 25
7/10/20 BMG BMG Resources Ltd 1 for 10
31/8/20 PNNDA PepinNini Lithium Ltd 1 for 100

 

Reasons for consolidating shares

The largest company to do a share consolidation is packaging stock Orora (ASX:ORA), which did a four-for-five consolidation on May. This was accompanied with a capital return.

The company said it was to reduce the number of shares on issue as well as to preserve the earnings per share and share price.

Many other companies have done bigger splits — a handful of stocks did a one for 100 consolidation.

One of the most recent was Alaska-focused explorer White Rock Minerals (ASX:WRM). Prior to undertaking a consolidation, the company had 1.9 billion shares on issue, but post consolidation and a capital raise it now has 72.6 million on issue.

Its rationale for the consolidation was similar to Orora’s, with White Rock telling shareholders it would provide “a capital structure that is more in line with White Rock’s size” and it “should also result in a share price level that is more attractive to a wider range of investors and could reduce share price volatility.”

Great Western Exploration (ASX:GTE) also recently consolidated its capital, swapping 60 shares for one.