I'd love pushpay to be included in the ASX300 so I can invest in them using my super, it would also help get more broker coverage and liquidity.
"They may want to list on the NASDAQ or be included in the ASX 200 and need to have more shares available as part of the listing rules."
This struck me as a potentially sensible explanation for the split so I decided to look into it. Nasdaq first. Pushpay already met all the requirements to list on the Nasdaq until the split. One of the requirements is "$3 minimum bid price of the company stock" so the split has just disqualified pushpay for a nasdaq listing based on that requirement. How about the asx200 and asx300?
ASX300: 4 requirements to be eligible then comes down to market value
1. asx listed. tick. 2. must be common or equity preferred stocks. tick. 3. market cap must be over $100m, pushpay = $1,880m. tick. 4. Liquidity: Stocks require a minimum relative liquidity of 30%
Relative liquidity is pushpay median liquidity / All Ordinaries market median liquidity on market cap weighted basis.
Pushpay's median liquidity is based on the median daily traded VALUE of shares / market cap. I don't have the tools to calculate this, but I suspect this is the requirement which pushpay does not meet. The stock split will not directly increase daily traded value of shares, it will only increase number of traded shares, but I suspect management are hoping it somehow increases the value of traded shares as well. I think they stated that when they split shares previously it caused an increase in value of shares traded, however it could have also just coincided with improving business fundamentals which was the real cause of increased trading value. I suspect with the business maturing, founder out of the picture, Huljich family stepping out, there is some growing desire for increased liquidity so insiders can divest. Index inclusion would also be healthy for market awareness/broker coverage, so they are no doubt trying to promote inclusion to these indices. If it works then it could be great for the share price, but it's a pretty strange strategy. The only way I see it working is if non-sophisticated (millennial) traders see a smaller share price as a sign it has higher potential gains, as silly as it seems this psychology is pretty prevalent.
Once a company meets those requirements it gets included based on market value which is the market cap less value held by long term investors (insiders, institutions, founders, other companies) which according to yahoo finance is 64% of shares so the market value of pushpay is around $676m, considering there are 50 companies in the asx300 with market caps under $500m this is clearly not the factor preventing pushpay's inclusion.
ASX200: this index has similar liquidity and market value requirements
Liquidity based on dollar value and the number of transactions which likely prohibits pushpay's inclusion. Market value worked out the same as above, the 3 companies in asx200 under 700m market cap have similar level of insider and institutional holders so I don't see this being a prohibiting factor.
TLDR: In summary, higher liquidity is required for pushpay to be included in the ASX200 and 300 and is likely the only factor prohibiting inclusion, however a stock split is a hail mary to achieve increased liquidity as it is assessed on the basis of daily value of traded shares, not number.
PPH Price at posting:
$6.83 Sentiment: Buy Disclosure: Held
