When carrying out trading activities, have you ever heard the term STOCK SPLIT in the stock market? MLBI will do a stock split with a ratio of 1:100. What does the announcement mean? Well, before discussing further, it's good to understand the term stock split first.
A stock split is the splitting of one share into several shares. Still confused about the sentence? I provide the illustration.
You have one sheet of Rp. 100,000 (one hundred thousand rupiah) and want to shop at the market. You feel that the money is too big. Therefore, you exchange IDR 100,000 to your friend for IDR 50,000 (fifty thousand rupiah) for 2 pieces. See the illustration below.
That's a stock split. I understand? The stock split will not change the nominal value of your shares (Rupiah), but only change the TOTAL of your SHARE. With a stock split, your number of shares will increase. Because the number of shares after the stock split is increasing, the stock split will increase the NUMBER OF SHARE SHARE CIRCULAR, but will not change the Rupiah value of the shares themselves.
1 sheet of IDR 100,000 = 1 x IDR 100,000 = IDR 100,000
2 bills of IDR 50,000 = 2x IDR 50,000 = IDR 100,000
You see, the value of the rupiah has not changed, only the number of sheets has changed. Initially you have 1 sheet, now you have 2 pieces with a smaller amount (split) of currency.
Implementation of Stock Split in the Stock Market Pasar
The company PT HM Sampoerna (HMSP) conducted a stock split, as follows:
Stock split ratio: 1:25.
Cum date: June 13, 2016
Ex date: June 14, 2016
The meaning of the announcement is: Every 1 (one) shareholder of HSMP up to the cum date of June 13, 2016, will get 25 shares on the ex date of June 14, 2016. Prior to the stock split, the share price of HMSP was in the range of 92,000 per share. I took the price of 92,500, so after the stock split, HMSP's share price will be in the range of 3,808 (92,500: 25).
So, what is the purpose of the issuer doing a stock split? And how do stock prices move after the issuer does a stock split? What are the characteristics of issuers who do stock splits? Please read the post: Issuer's Purpose to Do Stock Split.
