F&C shares down 75%: why there is no need to panic

Shareholders of F&C Investment Trust might have been alarmed by the shares falling 75% on 11 May. There is no need to panic as the overall value of someone’s investment hasn’t changed. Confused? You don’t need to be, as we now explain.

F&C has undertaken a share split. It’s a common tool used by companies to help keep the cost of one share at an affordable level.

A share price above £10 or even £100 can feel expensive to someone who only has a small amount of money to invest. Share splits are a way to bring the price down. To balance the equation, the company will give investors more shares, so their overall investment value is unchanged.

In F&C’s case, it has replaced each share in issue with four new ones. F&C shareholders won’t have had to buy these new shares – they’ll just see the total amount they hold in their portfolio suddenly increase four-fold.

For example, if someone held 100 shares in F&C, the investment was worth £1,318 at the market close on 8 May when the trust traded at £13.18. Following the 4:1 share split on 11 May the investor would hold 400 shares trading at 329.50p. The total value of their investment remained at £1,318. Any future dividends will factor in the share split.

The reason why the shares showed a 75% drop on 11 May was down to how market data systems work. They compare the price with the previous trading day and require manual intervention to adjust for events like share splits. These don’t always happen immediately, hence why it’s common to see an alarming drop on the day of a share split.