Lecture 3 (Chapter 1). Stock Splits

In September 2025, Naspers, one of the JSE's biggest and most expensive shares, at the time trading close to R6,000 per share announced something that sounds dramatic but isn't: a 5-for-1 stock split. As of 6 October 2025, every shareholder who held 1 Naspers share suddenly held 5.

Did those shareholders get five times richer overnight? No. The share price was also divided by 5 at the same moment. If you held 1 share worth R6,000 before the split, you held 5 shares worth roughly R1,200 each afterward - same total value, just sliced into smaller pieces.

So what's the point of a split?

Nothing changes about the company itself - not its profits, its assets, or your ownership percentage. What changes is the price tag per share. Naspers's board was explicit about why they did it: the share price had climbed so high that it was becoming inaccessible and illiquid for ordinary retail investors, especially compared to Prosus (its Amsterdam-listed subsidiary, priced much lower per share). Splitting the stock brought the per-share price down to a more approachable level and, in theory, invites more buying and selling activity.

Think of it like changing a R100 note into five R20 notes. You haven't gained or lost any money - it's just easier to spend in smaller amounts.

Why should you care as a beginner?

Two practical reasons:

1. Don't panic if a share price suddenly drops a lot with no bad news attached. Check whether a split happened — it explains the "drop" instantly, and it's not a loss.
2. Splits can make previously "expensive-looking" shares easier to buy. Before the split, one Naspers share cost close to R6,000 - a lot for a small, first investment. After the split, the same ownership stake is spread across cheaper, more bite-sized units.

One more term worth knowing: the reverse split. Some companies do the opposite: combining, say, 10 old shares into 1 new one, making the price higher per share. This is far less common and is sometimes (though not always) a sign a company is trying to look more "respectable" after a prolonged price decline. It's worth noticing, but not something beginners will run into often on the JSE.

Bottom line: a split changes how a company's value is sliced up, not how much it's actually worth. Nothing about your real, underlying investment changes.