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AssetCo, ASTO, Hasn’t Fallen 90%. The Price Has, But Not Really – Why?

Tim Worstall
Tim Worstall trader
Updated 11 Aug 2022

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Key points:

  • AssetCo share price is down 90%
  • But, perhaps not really
  • This is a nominal price change, not a real one

AssetCo (LON: ASTO) shares appear to have fallen 90% in one fell swoop which is, not entirely and wholly, what has happened. The shares were at £7, or 700p, and change and are now at 70p, or £0.70. That certainly looks like a 90% fall but there's a reason for this. A reason other than some disaster that has befallen the company that is. The actual reason is the influence of passing fashion and custom. What used to be 10p paid up capital shares in ASTO are now 1p paid up capital shares.

There is a certain oddity about this, over and above that initial observation. The action which led to this is normally a result of a strongly rising share price. Which isn't, as intimates will know, a feature of AssetCo recently. Actually, the shares in ASTO are down near 50% in recent months – an odd time to be undertaking this exercise.

What AssetCo actually does isn't wholly relevant to today's share price move although we might have a little snark about it in a minute. It's a wealth management firm and the lower levels of this market have not been having a good time of it recently. We might think that a little odd as falling markets are exactly when everyone requires expert assistance but that's not how we, the people, actually work. Folk tend to invest less in falling or fallen markets, making them difficult times for money managers. That's a useful reason – which might even be correct – for the recent share price fall but not for today's.

AssetCo share price
AssetCo share price from IG

Also Read: How To Buy Barclays Shares

As to what has actually happened it's a share split. This is something that is just pure fashion or custom. There's a thinking – based on pretty much nothing – that the “right” range for a share price in London is £1 to £10. The equivalent range in New York is $10 to $100 – that's how we know it's fashion or custom. That the same idea leads to those different price ranges.

There isn't actually much to this, just the look of the thing. But what it means is that when a share price gets wildly out of those ranges then companies often try to change them. Share splits, or consolidations (or, to Americans, reverse share splits) which means changing the number of shares in issue. The market capitalisation should not change – except as it means conforming to fashion – so any individual holding remains the same value. It's just that we've now more, or fewer, pieces of paper which make up the ownership of the company.

Which is what has happened here at AssetCo. They had a 10 for 1 split, meaning that shares previously at £7 are now 70 pence, while each holding and the value of the company overall should be the same as before.

At which point we can have our little snark. The aim of such share splits is to get into that goldilocks zone of £1 to £10. But AssetCo – a wealth manager recall – has just done one to take it out of that fashionable zone. Not a wholly grand advertisement for wealth management services we might think.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.