Ryanair's share price

[yaffel1]

FT.Com shows Ryanair's share price has dropped by 50.08% today. What's going on? Is it just a glitch, or has the holding company done something silly?

[glider insider]

apparantly Ryanairs stock "split" today, i.e if you had one old share, you know have two new shares, hence the value halving...

shame, thought this might have been a good opportunity!!!

[yaffel1]

Thanks for that. I didn't think it could be a "natural" fall, it was so dramatic!

[glider insider]

i understand what they have done, but can anyone explain ( in simple terms) why they might have done this.

Also, why only on the LSE and not on any of the other exchanges that they are listed on??

[Cloud Chaser]

I think its simply to make the shares appear better value. People buy more shares, Ryanair gets more dosh (to spend on new 737s and flight crew, hopefully)

[Gaza]

I think its simply to make the shares appear better value. People buy more shares, Ryanair gets more dosh (to spend on new 737s and flight crew, hopefully)

You are correct when you say it makes the shares seem better value. For example, Cable & Wireless use this tactic every time their shares hit £10, although with the fall in Telecoms stocks it may be sometime before they reach that level again.

Ryanair do not benefit from people buying shares. Once a company has floated the shares traded give no financial benefit to the company. The only way Ryanair can make more money from shares is issuing more stock. Generally companies will retain a holding internally that can be used to raise cash or for bonus or share option schemes. Alternatively they can have a Rights issue, similar to BT earlier in the year.

[glider insider]

perhaps i am being really thick..
split the stock..
so the shares seem better value to the investor...
therefore encouraging people to trade..
increased trade perhaps pushes up value of stock..

so might this mean that a lot more of the company tied up with Mr Ryan or MOL might be released onto the " open" market.

also, if staff have been given share options for a set number of shares, will the number of share they are allowed to buy also double, or is it a sneaky way of reducing expenditure for FR when a lot of staff option mature, as in fact only half the initial stock assigned for options is used.

the last point might seem a bit naive or even a bit of a conspiracy theory to some... but i am keen to know why FR would do a move like this??

any guesses?

[Gaza]

GI

If employees have share options then they also double with the split. i.e. Assume you have an option to purchase 1000 shares at £5, total cost £5000. During the course of the option period the share price rises to £10, so Ryanair (or more accurately their Registrar's) "split" the shares and half the price. Your 1000 shares become 2000 but your cost to buy remains at £5000. At the end of the option period you then have 2000 shares worth 2000 x "Current market price", which if everything is still going well should be more than £5.

There is nothing conspiratorial about it. As I said above many comapnies use this as a way to make the shares seem better value. It also means that small price movements look better in percentage terms.

[Faire d'income]

Advice to travellers:

Beware the airline that performs stunts!

;) ;) ;)

[Young Paul]

... and yes, large shareholders (such as MOL) do sell off blocks of shares from time to time. Or if the price drops, and they think it's worth it, sometimes buy them back. That's not the same as the company issuing more shares to raise more money.

[T_richard]

Gentleman May I provde some assistance in this discussion of stock splits.. What are my qualifications? I have been affiliated with the NYSE for 22 years as a broker. Stock splits are executed to increase the "float" the number of shares available to be bought or sold at any time. The larger the float the less volatile the stock. The lees volatile the stocks price is, the more interest a institutional investor will have in that company, (among other factors) Large buyers of a stock get a phone call from the NYSE if their trading activity bounces a stock around a lot. All stock options are adjusted to reflect the split automatically.

[jetstar1965]

Obviously Ryanair must be doing something right as it continues to grow and expand while carriers such as Aer Lingus, Sabena and Swissair which have been propped up for far too long by taxpayer money either go out of business or are struggling to survive.

Ryanair, Easyjet etc have brought some much needed competition to the European market place and obviously the public have responded in kind.

It doesn't make me happy to see people in the airline industry loosing their jobs by the thousands, but I can't help wondering that if the necessary changes had been put in place in the past then the job cuts would have not been so severe and the airlines would have been in much better financial shape prior to Sept 11th

Those who bash Ryanair whether wrongly or rightly get use to them because they are here to stay. If BA does abandon a large number of it's European routes then it will create further opportunities for Ryanair, Easyjet etc to strengthen and grow their business.