Why is the BHP share price sinking 10% today?

BHP’s shares are falling heavily on Wednesday. What’s happening?

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Key points

  • BHP shares are under pressure on Wednesday morning
  • This has been caused by the mining giant's shares trading ex-dividend for its in-specie dividend this morning
  • Eligible shareholders will soon receive one new Woodside share for every 5.534 BHP shares they own

The BHP Group Ltd (ASX: BHP) share price is falling heavily on Wednesday morning.

In early trade, the mining giant’s shares are down 10% to $42.88.

Why is the BHP share price sinking today?

The good news for shareholders is that the decline by the BHP share price has nothing to do with the company’s performance or a broker note.

Rather, today’s decline has everything to do with the Big Australian’s shares trading ex-dividend for its in-specie dividend. An in-specie dividend is a dividend that is paid in assets rather than cash.

On this occasion, this in-specie dividend sees BHP distributing 914,768,948 new shares in the newly named Woodside Energy Group Ltd (ASX: WDS) to shareholders. These shares, which had a total market value of $26.5 billion at yesterday’s close, were issued to BHP as part of the demerger of its petroleum assets into Woodside.

This has transformed Woodside into a top 10 global energy producer with over 2 billion barrels of proven and probable reserves and annual EBITDA approaching US$5 billion.

What’s next?

Eligible BHP shareholders will receive one new Woodside share for every 5.534 BHP shares they own when the demerger completes. This will be rounded down to the nearest whole share.

The demerger is expected to complete this time next week on 1 June. After which, those new shares will then commence normal trading on the ASX boards a day later on Thursday 2 June.

Why isn’t the Woodside share price tumbling?

While the addition of BHP’s petroleum assets will be game-changing for Woodside, this has already been factored in for some time. That’s why the Woodside share price is behaving largely as though nothing is happening today.

Furthermore, although it has just added energy operations worth almost $27 billion, it has issued the equivalent in shares to BHP shareholders. So, while Woodside’s market capitalisation may increase $27 billion, the addition of the shares has had a neutralising impact, making everything essentially the same on a per share basis.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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