The stock price of the Indian stockbroker firm Angel One Limited did not crash despite showing a large decline on Wednesday.
Stock Split
Early in the trading session, the NSE quoted the price of Angel One at ₹246.20, down from ₹2,243.70, or a drop 90.11%, but the sharp drop merely reflects a price adjustment after the brokerage firm split each of its shares with a face value of ₹10 into 10 shares with face value of ₹1.
This corporate action is known as stock split. This happens when a company divides its stock into multiple shares, which effectively lowers the price of each share sans changing the company’s market value.
Splitting stocks can increase liquidity and trading volume by redistributing share ownership into smaller, more affordable units.
“[T]he total value of an investor's holdings remains constant. The decrease in the price per share precisely offsets the increase in the number of shares,” Peter Gratton wrote on Investopedia. “This principle extends to the company's market capitalization, which remains unchanged before and after the split (except for market shifts). The total value of shares held by all shareholders should stay the same, maintaining the company's market value.
Angel One announced in January that its board approved the plan to split existing equity shares with face value of ₹10 each. The board likewise fixed February 26 as the record date for determining the eligible shareholders whose holdings will be subdivided.
“Regulatory stability has supported the overall market growth,” said Angel One chairman and managing director Dinesh Thakkar in a statement announcing the company’s business performance highlights and plans for stock split.
“The Board has also approved an interim dividend of ₹23 per share and 1:10 stock split. Our focus remains on disciplined execution, responsible technology adoption and keeping clients at the centre of our model.”
Stock Price Down
Amid the changes, the share price of Angel One is seeing losses. At time of writing, the stock is trading for ₹242.50, down by 2.61% from the previous close of ₹249.
