Why MBT Went Down From P99.50 to P76.5?

Last August 29,2013  I opened my account in my stockbrokers online platform trading and was surprised that Metrobank (MBT) is trading at 76.5. It went down from 99.45 to 76.5, a massive fall of 23%!

Obviously I immediately investigated what had happened. I checked if it is included in the top losers of the day, it was not there.  I’m having an idea already that the 30% stock dividend was already distributed.  I checked the ex date of the stock dividend and the date was August 29, 2013. So there you go, that was the answer on why MBT massively went down.

When I saw my portfolio, my MBT stock is having more than 30% loss! Wow! Can you imagine that, a 30% loss! Since a blue chip stock like MBT doesn’t fall as much as 30% in one day, where is the stock dividend? Why it is not reflecting in my portfolio? You know seeing that 30% loss is a sore eye to me.

Last August 28, 2013, MBT price is P99.50. The following day, which is the ex date of the 30% stock dividend, the price was amended to P76.50.

In stock dividend, here are some of the rules you need to observe.

a. The market capitalization remains the same

b .Number of shares are increased by the %  stock dividend

c. Price is decreased by the %  stock dividend

Before 30% Stock Dividend
# of Shares	2,111,386,017
Price	99.5
Total Market Capitalization	210,082,908,691.50
After 30% Stock Dividend
# of Shares	2,111,386,017
30% stock dividend (2,111,386,017 x 30%)	633,415,805
Total # of shares	2,744,801,822
Price (210,082,908,691.50 ÷ 2,744,801,822)	76.53846154125
Total Market Capitalization	210,082,908,691.50

Notice that Total Market Capitalization is the same. In essence, your shares value did not change at all. The price decrease was offset by an increase in the number of shares.

The correct price is 76.53846154125. However, you will never see that price in the stock market. The allowable fluctuations for prices between 50 to 99.50 is .05 only. Thus, the rounding off 76.53846154125 is 76.50.

This is the reason why the price of MBT is 76.50 last August  29, 2013.

Currently, the price already reflects the 30% stock dividend but the 30% additional shares are not yet issued to stockholders because the payment date is on Sep 16, 2013.

Presently, you’ll see a big loss in your MBT’s portfolio but that is not a concern because you will receive additional 30% shares on Sep 16, 2013.

By the way, stock dividends are also called scrip dividends.