Why investors would cheer a CSL share split

Is it time to split the shares in biotech giant CSL?

Could a split happen? The company does not rule out such a move, though CSL said there were no plans to split at present. Picture: NCA NewsWire / Dean Martin

It’s time to split the shares in biotech giant CSL.

With its role in COVID vaccines making headlines and results due this week, the company has rarely been so important to the local market yet its $281 shares are woefully out of kilter with other blue chips.

The impulse to split is running hot on Wall Street where the world’s biggest company Apple did a 4-for-1 split and triggered a 20 per cent share price rise.

In its ongoing battle against Commonwealth Bank to be the biggest Australian listed company, the blood products group has some catching up to do when it comes to shareholder representation. CBA — at $70.76 — is held by around five times as many investors as CSL. The bank has 880,000 shareholders and CSL has about 160,000 on the books.

In fact, CSL does not have any other ASX market leader anywhere near its price — which has regularly breached $300 — the closest would be Cochlear at $198.

Could a split happen? The company does not rule out such a move, though CSL said there were no plans to split at present.

Nevertheless, CSL has led the market with a share split previously — back in 2007 the company did a 3-for-1 split, a move its CEO at the time (now chairman) Brian McNamee described as a move to “improve the affordability and liquidity of the company shares for retail shareholders”.

Technically, a share split should not mean any change in the fundamentals of a stock. After all if you have $2000 worth of CSL and the board was to sign off on a 2-for-1 split you would still have $2000 worth of stock.

As Fiona Balzer, policy manager at the Australian Shareholders Association, suggests, “It’s just carving up a pie into smaller pieces — the pie remains the same”.

But in reality share splits make a difference: “Share splits are a good thing for retail investors, you get more liquidity, and as a retail investor you get the chance to diversify more,” says Matt Leibowitz, the founder of online broker Stake Ltd, which offers free trades to Australian investors trading in US markets.

Could a split happen?

“We ran data in the two weeks since the Apple split announcement and the volume of trades from Australians in Apple is up 90 per cent. A share split can be a signal from a strong company that it is ready for its next growth phase.”

Broker research consistently shows that splits or consolidations (the opposite move, when a company reduces its shares) invariably see a stock continuing on the course it had been heading — that is, the exercise does not alter share price momentum.

CSL is expected to report profits of $US2.4bn ($3.3bn) on Wednesday with a final dividend of near $US1.06. CEO Paul Perreault is expected to discuss the group’s COVID vaccine venture with the University of Queensland, and a parallel plan to manufacture the AstraZeneca vaccine when it comes to market, which the company has confirmed to The Australian.