The Link Administration Holdings Ltd (ASX: LNK) share price is ending the week with a huge decline.
In afternoon trade, the financial administration company's shares are down 39% to $2.01.
This is an improvement on its performance earlier in the day when the Link share price was down as much as 45% to a record low of $1.80.
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Why is the Link share price crashing lower?
The good news for shareholders is that today's decline is not necessarily a bad thing.
Last month, Link announced that it had agreed to sell 10% of its existing 42.77% shareholding in property settlements platform company PEXA Group Ltd (ASX: PXA). This led to Link generating total net proceeds of $101.9 million, which will be used to repay its borrowings.
At the same time, management revealed that it would distribute its remaining shares in PEXA to Link shareholders via an in-specie distribution.
Shareholders approved this plan earlier this month. As a result, next month they will receive one PEXA share for every 7.52 Link shares held at the record date rounded down to the nearest whole PEXA share.
This means that if you owned 1,000 Link shares valued at $3,290 at yesterday's close, you would receive 132 PEXA shares valued at approximately $1,569 next month.
This morning, Link shares traded ex-distribution for these PEXA shares, which means that the rights to the distribution are now with the shareholders on its share registry at yesterday's close. They won't transfer to buyers.
As a result, the Link share price has dropped to reflect this. After all, you wouldn't want to pay for something that you won't receive.
Eligible shareholders can now look forward to receiving their PEXA shares on 10 January.
When this distribution takes place, Link will have no direct ownership in PEXA. Instead, it will comprise of four global businesses with total revenue of over $1.1 billion and Operating EBITDA of over $250 million.
