Sempra Energy (NYSE: SRE) stock will halve at the open today. SRE stock dropping 50% is not, though, some disaster affecting wallets nationwide. It is instead a purely technical matter being done for reasons of fashion more than anything else. As a utility Sempra tends to be thought of as a widows and orphans stock - nice stable income, not too much capital risk - and that’s clearly not consistent with a 50% stock price change. Which is why we should emphasis that this is a purely nominal change in price, not a real one.
For those who don’t know: “Sempra operates as an energy infrastructure company in the United States and internationally. It operates through four segments: San Diego Gas & Electric Company, Southern California Gas Company, Sempra Texas Utilities, and Sempra Infrastructure.” Two products, gas and electric, in two states, Ca and TX. One of the larger utilities in the US in fact.
The share price recently has suffered a bit as interest rates rise - as the stock is interesting or the dividend yield clearly there will be some headwind as yields rise generally along with the interest rate environment.
Sempra Energy stock price from Google Finance
The reason for the stock price move today, that half off, is fashion - OK, perhaps culture. The US markets have this idea that the “right” price range is $10 to $100. Something over that is considered “expensive”. This is, of course, the number illusion but people really do think it matters. So, if you’ve been successful enough that the stock price rises above this range you might want to change that. Exactly what is being done here by Sempra - simply declare that every one old share is now two new shares: “Shareholders of record as of Aug. 14 will receive an additional share for every share they own at the time. The additional shares will be distributed on Aug. 21 and Sempra expects its shares to begin trading on a split-adjusted basis on Aug. 22. "The stock split is intended to make Sempra's common stock more accessible to a broader base of investors and to improve the overall trading volume of such shares due to the increased number of shares outstanding," the company said.”
Logically it shouldn’t really work, in reality it often does - small stock price rises often are seen after such a stock split. The major point for us to make here though is that the 50% fall to be seen on the ticker today is not the result of some disaster - as just happened with Hawaiian Electric say - but is instead a nominal price change that isn’t emptying wallets at all. In fact, might modestly add to them.
