All things Share Split!

After the news that the eagerly-anticipated Football Index share split will be announced on Thursday’s Trader Meet, we have put together an article on the topic that everyone is talking about, not only to drill down into the details that we already know but also to reflect on the previous share split that took place in June 2016.

What do we know?

Although the specifics have not yet been revealed, we do know a fair amount about how it is going to happen, if we look at previous share splits. We know that the split will take place in Q1 – therefore at some point between now and March 31st.

We know that the very basics of a share split imply that all prices will be divided by a certain factor, while the number of shares that people currently own are multiplied by that same factor, meaning that there is no change to the value of your holding.

It is also implied that dividends will be divided by that same factor, although this has not yet been confirmed.

What are we yet to find out?

Thursday’s announcement is expected to clear up some key details. Firstly, the date on which the share split will take place, or at least a more specific time-frame. This could cause a reaction in the market, especially if the date isn’t far away. We also expect to find out the share split factor. Many people are expecting it to be a four-way share split – therefore prices to be divided by four and the number of shares to be multiplied by four – because that is what happened last time (we’ll get to that in a minute) but a two-way split is also on the cards.

Either way, we also expect to hear that dividends will be rounded upwards, or the Media dividends at least. It will be interesting to hear what happens to in-play dividends after the split too, especially in the case of a four-way split because a 1p assist reward would become 0.25p for example – not the most enticing reward. In-play dividends will likely remain the same or perhaps be reduced by a lower factor than everything else in order to make them more attractive and increase in-play trading to support commission growth, however this is by no means confirmed.

What happened last time?

When the first ever Football Index share split took place on 14th June 2016, the shares were split by a factor of four, taking the top of the market from around £6 down to around £1.50 (at least at the start!) and quadrupling the number of shares owned by each trader. We also saw the number of shares needed to be bought in order to move the price of a player increase too. One of the reasons people have been so keen for a share split was due to what happened after the first split. Prices began to rocket at the top of the market (as you can see below) and Ronaldo was the in-demand man at the time – he saw his price move from a post-split price of £1.44 up to £2.02 within the same day, overtaking Rooney for top spot in the process.

The only dividend at the time was the 20p media dividend which was then reduced to the 5p dividend it is today.

We were also given plenty of notice of the split, receiving the below email far in advance of the date on which it took place, making a “surprise” share split very unlikely this time around.

What reaction can we expect?

The clever nature of Football Index’s announcement in stages has meant we’ve already seen some impressive rises. You can see that since the initial announcement on ____ the top 5 have seen some huge increases. So although further rises are likely on Thursday, the impact on the actual day of the split may be smaller as it is expected that many will have already invested before that point. Another thing to note is that back at the time of the first split, we only had 200 players available to purchase, and because media was the only dividend, around 90% of those 200 were pretty useless, giving investors a much more concentrated range of options to put their money. Now, since there are so many different players, dividends and strategies, the extra cash may be less concentrated at the top, but it still seems to be the main destination for a lot of people’s wonga. Additionally, the fact that Ronaldo was the key rising player after the last split was no coincidence. He was the man of the moment because of a Euro 2016 group game that he was due to be involved in the next day. We expect to see a similar trend this time. Whoever is the man of the moment this time around will see most traders fixate on them. We will see the FOMO effect take place, causing the player’s price to continue to climb. Therefore, when the date is announced, it might be worth having a look at the fixtures close to the date of the share split. For example, a United game might make Pogba or Rashford that man in demand, whereas an easy Performance Buzz win for Messi or Hazard may make them that man in demand. It is unclear who it will be but it would be surprising if there isn’t a specific player that everyone wants to buy shares in!

Even if the rises on the day of the split are reduced compared to last time, you can definitely see the long-term effects of a share split – it will reduce the barriers to entry for many new traders immensely. This is clear if you consider the fact that if the last split had not taken place, Neymar would have had a price of above £80 now. The hope is that this is not counter-acted too much by dividends appearing less attractive, however, plenty of new users at the moment seem to have no interest or knowledge of dividends and are still enjoying the platform so this may have only a small effect. (This lack of knowledge is not the fault of new traders, but it is definitely not a good thing and more to do with Football Index’s advice for new users but that is an issue for another day!)

We hope that has cleared up a few things for you, or in the case of experienced traders, taken you on a nice trip down memory lane! Be sure to stay tuned into Football Index’s social media on Thursday night or if you’re at the meet up, we’ll see you there! Either way you won’t want to miss it!

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