Mutual fund splits are a rare occurrence, but are just as important as stock splits, even if less common. Mutual Fund splits work similarly to stock splits where there is a consolidation of shares, resulting in a price increase or decrease, but the net asset value remains the same. While these events are rare, it is important to have a good data provider like Tiingo that covers these events.
What are stock splits?
Before getting into what mutual fund splits are, let’s cover what are stock splits. A stock split is “window-dressing” in that a company either consolidates, or adds more shares, to their existing float without issuing or buying back new shares. In other words, they just change the multiplier of shares. The net result is that market caps stay the same, there are just more or less shares.
Why do companies issue stock splits?
Companies issues stock splits because they believe the change in price will make their stock more attractive. Some executives believe a lower share price will attract more buyers. This line of thinking may be flawed though as more retail brokers offer partial share purchases. Nonetheless, some believe it is a psychological affect.
Another reason for a reverse stock split (where companies reduce the number of shares to increase price), is because some exchanges, like Nasdaq, have a minimum share price of $1.00 after an IPO. If a share price drops below that level, they may very well be delisted from the Exchange. Losing listing status from a higher-tier exchange may be seen as a negative for the company as liquidity may drop and they may have less access to capital raising via equity. Almost as if a self-fulfilling prophecy.
Why do mutual funds issue stock splits?
Mutual funds issue splits for the same reason as companies, they believe it will make their fund more attractive. This line of thinking is a bit even more bizarre for mutual funds though as its very common for investors to purchase mutual funds thinking in dollar amounts rather than price per share amounts.
Another reason for a mutual funds to split is due to a fund restructuring. A company may want to restructure a fund and issue a split alongside it,
In general, mutual fund splits are rarer, but also very significant.
Where can I find Mutual Fund Split data?
Mutual fund split data is rare, but Tiingo.com is a distributor of this data. You can find product information about our split data here: Stock, ETF, and Mutual Fund Split Information as well as documentation for our API Directly here: Stock, ETF, and Mutual Fund Split API Documentation. Many websites do not include this information due to the difficulty of obtaining it, but with the Tiingo APIs you can collect both historical, and future split information.