StoneX Group (NASDAQ: SNEX) stock should drop 33%. This is not a reason to panic, at least as far as we know there’s not terrible news. This also won’t eviscerate wallets - this is a purely nominal change in the stock price. As to why the company identifies a specific problem with the current stock price. This may or may not be true these days. In the past it would well have been actually true, these days it’s more about perceptions than anything else.
The business at StoneX: “StoneX Group Inc. operates as a global financial services network that connects companies, organizations, traders, and investors to market ecosystem worldwide. The company operates through Commercial, Institutional, Retail, and Global Payments segments. The Commercial segment provides risk management and hedging, exchange-traded and OTC products execution and clearing, voice brokerage, market intelligence, physical trading, and commodity financing and logistics services. The Institutional segment offers equity trading services to institutional clients; clearing and execution services in futures exchanges; brokerage foreign exchange services for the financial institutions and professional traders; and OTC products, as well as originates, structures, and places debt instruments in capital markets.”
A perfectly respectable place among the pipes and structures of the financial markets. It also does this pretty well. Which is what leads to the perceived problem.
StomeX Group stock price from Google Finance
The problem is simply something that definitely used to be true. A stock price that is “too high” will mean that some people will not buy it. Simply because they can’t put that much money into the one stock. These days with fractional ownership that’s not really a problem. But the idea lives on in the culture of the markets. The “right” range for a stock price is in the $10 to $100 range. We can prove it’s just culture because that for London is £1 to £10.
So, something nudging $100, people will think it’s “expensive” and so be put off buying it. This makes management sad as it puts a cap - not a very strong one but one all the same - on the stock price. Solve this by simply declaring that two old shares are now three new ones - a three for two stock split: “StoneX Group Inc. (NASDAQ: SNEX) announced today that its Board of Directors has approved a three-for-two split of its common stock to make stock ownership more accessible to employees and investors. The stock split will be effected as a stock dividend entitling each stockholder of record to receive one additional share of common stock for every two shares owned….. Trading will begin on a stock split-adjusted basis on November 27, 2023.”
This is that purely technical change - but as a result of there being 50% more shares in issue the price will obviously decline by one third.