How it is done ?
The company splits its shares by de-listing the old ones and creating new ones. the number of new shares issued is dependent on the event ratio. So if the ratio is 1/3, then for each 1 de-listed share, every shareholder would consequently get 3 new shares for each 1 share previously held.
Reason for the stock split
The company usually splits its shares to reduce their trading value. Consider an example, of a company with shares trading, at 1000 USD / share. This price tag makes it very difficult to attract volume. As a result the price has to go down to boost interest so the shares, become more affordable for most of the market participants
That was just an example, the company can do this for many reasons.
Effect on the share capital
First of all, this event does not have any effect on the nominal share capital of the company. The only thing that changes, is the shares outstanding, as well as the Par value (Nominal value) of the share.
The key details to extract from this event would be:
- Number of shares before the consolidation
- Old Par value
- New Par value
- Number of shares after the event
- Listing details of the new shares issued after the event (ISIN, Label, Symbol)
- Listing date of the new shares.