Polar Capital Technology Trust is set to split its shares 10-1 – what does this mean for investors?

Investors in FTSE 250-listed Polar Capital Technology Trust are set to vote on proposals for a 10-1 stock split.

PCT said the move was “intended to help regular savers and those looking to invest smaller amounts”. The shares are currently trading at more than £30 each.

Shareholders of PCT, which is popular on most DIY trading platforms, will have the chance to vote on the stock split at the company’s next annual general meeting on September 11.

PCT, with total assets worth over £4.4bn, has a technology-focused portfolio, giving UK investors access to top holdings such as Nvidia, Microsoft, Apple and Meta.

On Wednesday, the company told shareholders: “The lower market price of each new common share immediately following the stock split is intended to make each share more affordable to investors.”

This will encourage “greater participation” and “provide greater flexibility in terms of deal sizes for investors with different investment profiles,” the report said.

PCT shares are currently trading at 3,290p, down 3.2 percent as a result of the proposals.

If shareholders agree, the split will result in shareholders receiving 10 new common shares in exchange for each existing common share they held on the record date.

What does this mean for shareholders?

Dan Coatsworth, investment analyst at AJ Bell, said in an interview with This is Money: ‘Stock splits are a great way to make stocks more affordable for people who can only invest a small amount of money.

‘They are useful for people who are keen to build their wealth but can only put a small proportion of their salary each month into an ISA or pension.

‘Polar Capital Technology Trust is currently trading at around £33 per share, so someone who can only afford £50 a month could buy just one share at a time.

‘If you replace one share with 10 new ones, the price drops to £3.30 per share. That means an investor can buy 15 shares with a monthly investment of £50.

“It’s a clever technique to make an investment more accessible. We’ve seen big names like Nvidia, Tesla and Apple use this trick in recent years.”

He added: ‘Polar Capital Technology Trust is currently valued at approximately £4 billion and this valuation will not be affected by the stock split. Only the share price will fall to reflect the increase in shares in issue.

‘Existing investors will find that the value of each share will fall at the time of the split, but they will own more shares. It all balances out, so if they had £500 worth of shares before the split, they will still own £500 worth of shares after the split.

‘What could potentially happen after the split is that more investors become interested in the trust because each share is more affordable, and additional demand drives the price up. We certainly saw that happen with Nvidia after the recent stock split.’

Richard Evans, investment journalist at Fidelity International, said: ‘It is common for companies to split their shares to prevent their prices from rising so much that they become unaffordable to ordinary investors.

‘These types of situations mainly occur in fast-growing and successful technology companies, whose share prices can sometimes rise enormously.

A stock split is a change in the way an investor’s interest in a company is represented by the shares he owns.

‘This means that the trust increases the number of shares outstanding, while the share price falls proportionally.

‘For investors, their holdings are automatically adjusted and a stock split does not change the overall value of their investment, but it does make shares more affordable and potentially more attractive to a wider range of investors.

‘It can also increase liquidity and trading volume, as more shares are available at a lower price.’

Should I invest if stocks become more affordable?

Polar Capital shares have risen about 50 percent over the past year, with investors eager to gain exposure to stocks like Nvidia, which have surged in value so far in 2024.

According to the Association of Investment Companies, net asset value has increased by more than 40 percent over the past 12 months, but shares still trade at a discount of about 7 percent.

According to analysts at QuotedData, PCT remains “fully focused on the artificial intelligence theme” and has “refined the portfolio towards the ‘AI enablers’ and ‘AI beneficiaries’ that it believes will outperform the rest of the sector in the long term.”

In June, PCT was the best-selling Isa investment fund on Fidelity Personal Investing.

Ed Monk, deputy chief executive at Fidelity International, said: ‘Polar Capital Technology Trust shot up the charts to number one for both ISA and SIPP investors, having not been in the top 10 since April.

The company’s 45 percent position in technology has driven performance, and top holdings include Nvidia, Microsoft, Meta and Amazon.

‘A recently reduced position in Apple reflects concerns about regulatory issues, though it still represents 4.31 percent of the portfolio.’