Vanguard had a funny announcement today that I had to comment on (from Vanguard.com):
Vanguard announces share split for three exchange-traded funds
June 04, 2008 – Vanguard announced today a two-for-one split of shares of Vanguard® Total Stock Market ETF (VTI), Vanguard Emerging Markets ETF (VWO), and Vanguard Extended Market ETF (VXF). The conventional shares of the funds are not affected by this split.
The share split entitles each shareholder of record at the close of business on June 13, 2008 to receive one additional share for every share of the ETF held on that date. The additional shares are expected to be distributed to shareholders on June 17. The shares will trade at the new split-adjusted prices beginning June 18.
I need someone to explain this one to me. After all, splitting a stock does absolutely nothing for the fundamentals of the stock. You might argue there is some emotional, momentum-based advantage when go-go growth stocks do it, but this is an index fund. And a Vanguard fund to boot! I just can’t imagine the Vanguard trustees chasing momentum money, or expecting momentum money to flow to an index fund just because it’s splitting.
There is that old argument that you want to keep share prices low so “small investors” can buy a “round lot” of 100 shares… but that logic went out the door with odd lots and discount brokers about 30 years ago.
So why did they do it? Are they trying to capture small investments under $100 with the ETF? Brokers like E*Trade already offer free dividend reinvestment on ETFs, which allows you to buy partial shares.
Anyway, if you own any of these funds, note it in your calendar, Quicken, etc.