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Question

What is a Subdivision?

Answer

A Subdivision is the opposite of a Consolidation with the number of shares in issue being increased by a set ratio. In turn the nominal value of the shares and the market price per share of the shares will decrease by the same ratio.

A company will split each ordinary share into a set number of new ordinary shares, for example a shareholder may receive 5 new ordinary shares for 1 existing ordinary share. The nominal value of the shares will also be adjusted and in a 5 for 1 subdivision, if the shares were ordinary 50p shares then they would become ordinary 10p shares.

The market price per share will decrease to reflect that each share is worth a smaller part of the company. For example, before the Subdivision each ordinary 50p share might have been worth £1.00, and after the 5 for 1 subdivision they would have a value of 20 pence (subject to normal market movements).

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