Earlier this month, payments platform company Pushpay Holdings Ltd (ASX: PPH) announced it will undertake a four-for-one share split. This means that each share held in the company before the share split will turn into four shares after the split takes place.
This process kicks off today, Tuesday 24 November, so here's what you need to know.
Why is Pushpay splitting its shares?
Traditionally, share splits have been a way to make share ownership more accessible for smaller investors like you and me. That's because companies with high share prices can be out of reach for investors if they can only purchase whole shares.
Imagine trying to buy a whole share (or more!) in Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B). The Berkshire Hathaway share price was a phenomenal US$341,000 per share in November 2020. The CSL Limited (ASX: CSL) share price of around $317 per share is certainly more accessible, but even that could be a challenge if you only had $300 to invest.
This is less of a problem with newer investing platforms that offer fractional share investing, where you can invest fixed dollar amounts and buy part-shares. Still, the additional quantity of shares means there are more shares available to change hands as Pushpay noted in its announcement: "The Pushpay Board considers that the share split will assist to enhance liquidity in the market for Pushpay's ordinary shares."
Has Pushpay split its shares before?
Yes, this isn't the first time Pushpay has split its shares. Pushpay previously completed a four-for-one share split in February 2016.
At that time, Pushpay was only listed on the New Zealand stock exchange, but the company says it saw a positive impact from the split. In its most recent November announcement, Pushpay noted that the previous split resulted in "a meaningful increase in both the shareholder base and liquidity that was partly attributable to the share split."
The other part, of course, is likely to do with the company's impressive growth profile. Pushpay revenue has rocketed from NZ$15 million in the 2016 financial year to NZ$187 million (US$129.8 million) in the 2020 financial year.
When is the Pushpay share split happening?
Today, Tuesday 24 November, is the last date for trading in Pushpay shares on a pre-share split basis.
What happens then? Well from the start of trading on 25 November until market close on Friday 27 November, Pushpay shares will trade as if the share split has occurred. This means that, all else being equal, the Pushpay share price will drop to around one quarter of the previous day's closing price.
However, it's worth noting that over this period, Pushpay shares will trade on the ASX under the temporary ticker 'PPHDA' and trades will be made on a deferred settlement basis, so settlement will occur on Wednesday 2 December 2020.
From Monday 30 November 2020, things will return to normal and the Pushpay share price will be found under the 'PPH' ticker with regular settlement times.
Do share splits increase a company's value?
Share splits have no impact on a company's fundamental valuation, but when the share price is high, a split can make it easier for individual investors to buy shares in the company.
This was a factor behind big name share splits in the United States this year, with both Apple Inc (NASDAQ: AAPL) shares and Tesla Inc (NASDAQ: TSLA) shares splitting into smaller slices. However, with the Pushpay share price trading around $7.64 at the time of the announcement, it's likely that having more shares outstanding available to buy and sell was a larger driver for Pushpay's split.
