On the face of it, the share price of Baillie Gifford European Growth (BGEU) plunged a whopping 90% this week, but investors shouldn’t be alarmed as the investment trust has actually completed a 10-for-1 stock split.

A stock split is where a company divides its existing stock into multiple shares, in this case 10-for-1, so investors in the Baillie Gifford trust have received 10 new shares for every one old share they own. Don’t be shocked if the share price looks a lot lower than before, the value of the holding remains exactly the same.

Another investment trust, Bankers (BNKR), is doing the same with its 10-for-1 stock split set to become effective on 1 March.

Generally the reason for a stock split is to make a stock seem more affordable.

Bankers said its split is to ‘assist monthly savers and those who reinvest their dividends or are looking to invest smaller amounts’, adding the split may also improve the liquidity in and marketability of its shares, ‘which would benefit all shareholders.’

It’s a route an increasing number of trusts and companies are going down, including US giants Tesla and Apple in 2020.

Popular investment trusts which should consider a stock split include Lindsell Train (LTI), which has a share price of £1,325, and Personal Assets Trust (PNL) with a share price of around £450.

‹ Previous2021-02-04Next ›