Key points handled in this topic:
- What are share splits and what is the process behind it?
- What is a deferred settlement period?
- What effect does this have on the shares I own?
- Will Sharesight automate share splits for me in my portfolio?
- When will the share splits be visible in Sharesight?
- How long do I have to wait until my main share holding has price updates again?
- What if I have purchased shares whilst the company is in the deferred settlement?
- Where can I find examples of how other clients handled complicated share splits?
- What if my main share holding has an out of date price currently?
- Renown Corporate Actions and their instructions
What are share splits and what is the process behind it?
A share split is a corporate event where a listed company splits its shares in some pre-defined ratio, e.g. 1:10. A share split is the reverse of a consolidation which increases the number of shares in some pre-defined ratio, e.g. 10:1. The market price for the shares will naturally adjust such that the market value of the shares does not change (all other things being equal). A consolidation or split does not alter the cost base of the holding.
The reason a company would implement a split is because it may feel that the per unit share price has become too high due to some unforeseen circumstances.
What is a deferred settlement period?
During the process of implementing share splits a company might go into a deferred settlement period that usually lasts between 1-3 weeks. A Deferred Settlement is a period in which the obligation to settle on a trade date plus three (3) business days (T+3) basis is deferred until the time following the end date that the exchange it trades on has decided on.
In other words, the company starts trading temporarily under a new share code. Typically, this is the original code + DA at the end for example DTL becomes DTLDA.
Important to remember! Please note that once the settlement period is over the holding starts trading under its main share code again so DTL (Data#3 Limited is an ICT company) rather than DTLDA.
What effect does this have on the shares I own?
The shares you own under the original holding will not have price updates once the settlement period begins. The price will be updated again when the deferred settlement period has ended. The reason for this is that the original holding now trades under the DA (deferred settlement) code, DTLDA.
Will Sharesight automate share splits for me in my portfolio?
Typically Sharesight handled share splits without issue. However, please note that Sharesight creates the share splits adjustment on the date that the splits takes effect (action date). Once the split has taken effect in your portfolio the shares will no longer trade on a deferred settlement basis and you can soon expect price updates again.
When will the share splits be visible in Sharesight?
The adjustment transaction for the share splits will be recorded on the action date.
However, the share split ratio will appear in the Corporate Actions sidebar as soon as the split is announced.
In the screenshot below there is an example of where this occurs as far as a month before the split is actually due to take effect. This is our way of informing you a corporate action is on the way!
To view the corporate action sidebar go into the holding > scroll down > click Corporate Action > click Split like the example below.
How long do I have to wait until my main share holding has price updates again?
During the 1-3 weeks that the holding is under deferred settlement there will be no price updates under the main share code. There will only be price updates for the DA (DTLDA) code in that time as this is the code DTL is currently trading under.
What can I do if I want to see price updates now, is there a workaround?
What you could do to get price updates is use the share checker function (see screenshot below) to check the prices for the deferred settlement share code. Note that these prices will be quoted as if the share split has taken effect. Therefore, divide the price update by the share split ratio in order to compare it with your previous buy or sell trade prices.
Find the Share Checker > Middle right hand of the page > next to Add Holding:
Find the deferred settlement temporary share code after clicking > Share Checker:
What if I have purchased shares whilst the company is in the deferred settlement?
The best option would be to record the new purchased shares under the main share code since the DA code will revert back to the main share code. This will save you work later on.
Important note: Please remember that the price and quantity of your newly purchased shares assume that the share split has taken effect already. Therefore, you may need to adjust this accordingly if your trade is dated prior to the share split action date.
Where can I find some examples of how other clients handled more complicated share splits?
The forum is a great place to start! For example have a look at how clients handled the famous Google share split. This share split involved an entirely new share code and this share split needed to be recorded manually in part. Visit the forum to see the ins and outs of the GOOG to GOOGL share-split
Should you not find your split and it is a tricky one please feel free to leave a message as a question in the Sharesight Forum and we’ll make sure to help you along.
What if my main share holding has an out of date price currently?
The price will update as soon as the deferred settlement period has ended and the shares are traded under the main share code again. As mentioned before please note the deferred settlement period might take up to 1-3 weeks.
Looking for more corporate action advice? Visit the Corporate Action page.
Renown Corporate Actions and their instructions
- How to handle the NAB demerger and CYB IPO
- How to handle the M2 Vocus merger to account for CGT
- How to handle the Macquarie Group / Sydney Airport Reconstruction
Terms: Demerger, scrip issue, bonus issue, capitalisation issue, free issue.