- Polar Capital plans 10-1 share split proposal
- Share split aims to aid small investors
- Shareholders to vote on split in September
Polar Capital Technology Trust investors, listed on the FTSE 250, will vote on proposals for a 10-1 share split.
PCT stated that the decision is ‘designed to assist regular savers and those who want to invest smaller amounts’. Its shares are now trading at more than £30 each.
PCT, which is popular on most DIY trading platforms, will hold its next annual general meeting on September 11, and its shareholders will have the opportunity to vote on the share split.
With over £4.4 billion in total assets, PCT has a tech-heavy portfolio that exposes UK investors to significant holdings such as Nvidia, Microsoft, Apple, and Meta.
On Wednesday, it informed shareholders that “the reduced market price of each new ordinary share immediately following the share split is intended to help make each share more affordable for investors.”
It claims that this will stimulate ‘more involvement’ and allow ‘increased flexibility in terms of trade size for investors with varying investment profiles.’
PCT shares are trading at 3,290p, down 3.2% after the proposals.
If shareholders approve the sub-division, they will get ten new ordinary shares in exchange for each existing ordinary share held on the record date.
What does this signify for the shareholders?
Dan Coatsworth, an investing analyst at AJ Bell, told This is Money that share splits are an excellent way to make a stock cheaper to consumers with limited investment funds.
‘They are excellent for people who want to create wealth but can only invest a modest portion of their monthly income into an ISA or pension.
Polar Capital Technology Trust is now trading at roughly £33 per share, so someone with a monthly income of £50 could only purchase one share at a time.
‘Replacing one share with ten new ones will reduce the price to £3.30 a share, allowing an investor to purchase 15 shares with a £50 monthly commitment.
‘It’s a clever strategy for making an investment more accessible, and we’ve seen huge names like Nvidia, Tesla, and Apple do it in recent years.’
He stated that Polar Capital Technology Trust is valued at roughly £4 billion, and the stock split will not change this valuation. Only the share price will decline to reflect the increase in issued shares.
‘Existing investors will see that the value of each share decreases at the time of the split, but they will hold more shares. Everything balances out, so if they owned £500 of shares prior to the split, they will still own £500 after the split.
What could happen after the split is that more investors get interested in the trust since each share is now more affordable, and more demand drives up the price. We indeed witnessed this with Nvidia following their recent share split.
According to Richard Evans, an investment writer at Fidelity International, corporations usually split their shares to prevent the price from rising to the point where ordinary investors cannot afford them.
‘It’s especially likely to happen with fast-growing and successful technological businesses, whose stock prices can sometimes skyrocket.
A share split is a change in how an investor’s shares indicate their position in a firm.
‘It signifies that the trust is growing the number of outstanding shares while the share price decreases accordingly.
‘For investors, their holdings will be automatically updated, and a share split does not affect their investment’s total value, but it makes shares more affordable and appealing to a wider variety of investors.
‘It can also boost liquidity and trading activity because more shares are accessible at a reduced price.’
Should I invest when shares become more affordable?
Polar Capital shares have climbed by about 50% in the previous year, with investors looking to increase exposure to businesses like Nvidia, which have skyrocketed thus far in 2024.
According to the Association of Investment Companies, its net asset value has increased by more than 40% in the last year. Still, its shares continue to trade at a discount of approximately 7%.
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According to QuotedData analysts, PCT ‘ remains all in on the artificial intelligence investment theme,’ having ‘fine-tuned the portfolio towards the “AI enablers” and “AI beneficiaries” that it believes will outperform the broader sector over the long term.’
PCT was the top-selling ISA investment trust on Fidelity Personal Investing in June.
According to Ed Monk, associate director at Fidelity International, Polar Capital Technology Trust has risen to first place in the rankings for ISA and SIPP investors after being out of the top ten since April.
‘The firm’s 45 percent stake in technology has boosted performance, and its top holdings include Nvidia, Microsoft, Meta, and Amazon.
A recently reduced position in Apple underscores concerns about regulatory obstacles, although it still accounts for 4.31 percent of the portfolio.
