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Stock splits, while popular in the United States, are a relatively rare occurrence for ASX shares. Perhaps it’s our lack of $2,000 shares which, until recently, were sported by both Amazon.com Inc and Alphabet Inc (parent company of Google). Or perhaps it’s just a cultural preference. But what is even rarer is an ETF stock split.
Exchange-traded funds (ETFs) technically don’t have shares. Instead, investors buy units of ETFs. That’s because they are buying into a trust, not a company.
But, just like shares, units can get expensive over time as well. And just like with a share, an ETF provider can order a stock split of its units.
That’s exactly what is happening with the iShares S&P 500 ETF (ASX: IVV) very soon.
S&P 500 ETF to undergo stock split
The iShares S&P 500 ETF is one of the most popular international ETFs on the ASX. It invests in a portfolio tracking the S&P 500 Index. This is the most dominant index representing the US market. It’s also the most widely tracked index in the world.
Everyone who’s anyone in the US markets can probably be found in the S&P 500. Apple, Amazon and Alphabet are all there. As are Ford, Microsoft, Coca-Cola, Tesla, and McDonald’s.
Yet today, one unit of the iShares S&P 500 ETF will cost an ASX investor $598.65 – no mere chunk of change. By comparison, one unit of the Australian-focused iShares Core S&P/ASX 200 ETF (ASX: IOZ) will only set an investor back $29.18 right now.
But this is about to change. Last week, BlackRock, the ETF provider behind these two funds, announced a stock split for the iShares S&P 500 ETF. This will be a 15:1 split, which will see each unit of the ETF become 15 units.
This will have the effect of lowering the cost of one unit by a factor of 15 times, with all unitholders getting 15 times as many shares as they currently own in compensation.
So if an investor owns a single share of the iShares S&P 500 ETF today, valued at $598.65, they will own 15 units, each worth $39.91, following the split. Overall, the investor won’t see either an increase or decrease in their overall position.
IVV or IVVDB?
The last day that units of the iShares S&P 500 ETF will trade on a pre-split basis will be 6 December. Trading will then commence the following day on a post-split basis.
However, this ETF will temporarily use the ticker code IVVDB while trading on a deferred settlement arrangement from 6 December onwards. The ETF will only return to its old code of IVV and to normal trading on 13 December.
So if you own units of the iShares S&P 500 ETF, get ready to own a lot more at a far lower unit price.