Is the FAR (ASX:FAR) share price really up 12,000% today?

What's going on with the FAR share price today?

| More on:
surprised asx investor appearing incredulous at hearing asx share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors may be wondering what's going on with the FAR Limited (ASX: FAR) share price on Friday.

This morning, trading platforms show that the oil and gas explorer's shares are up a whopping 12,000% to $1.32.

To put that in context, if you invested $10,000 into an ASX share and it gained 12,000%, your investment would be worth a cool $1.2 million.

Is the FAR share price actually minting millionaires today?

The answer to this question, unfortunately, is a resounding no.

The reason the FAR share price is showing as being up 12,000% on Friday is that it has now completed its share consolidation.

Share consolidations are not very common on the Australian share market. In fact, share splits are far more common.

A share split is often undertaken by a company when they want to boost share liquidity or make share prices more attractive. For example, Berkshire Hathaway has resisted calls for years to undertake a share split. As a result, you need a massive US$417,800 to buy a single Berkshire Hathaway Class A share. This is unattainable for most investors.

Pushpay Holdings Ltd (ASX: PPH) is an example of a company that has split its shares recently. It did this to boost liquidity.

It is important to note that although the share price may change during a split, the value of a holding does not. If you had 1,000 shares at $1 per share (total value of $1,000), you would have 2,000 shares at 50 cents per share (still with a total value of $1,000) following a 2-1 split.

What is FAR doing?

FAR has undertaken a share consolidation or reverse share split to bring its share price up to a more tradable level.

Prior to the consolidation, the FAR share price was trading at 1.1 cents. This means that a move to 1.2 cents would result in a 9% gain and vice versa if it went the other way. These sorts of swings are not ideal for investors and it appears as though management felt the same way.

As a result, it has consolidated the issued capital of FAR on the basis of one share for every one hundred shares.

This means that if you owned 100 shares yesterday, you would now own a single share at the current FAR share price. And except for intra-day movements, the value of your holding would have remained the same.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Ten smiling business people wave to the camera after receiving some winning company news.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a nervous, but positive, Tuesday for ASX investors.

Read more »

two colleagues high five each other as they sit side by side at a long desk in front of their laptop computers in an office environment.
Share Gainers

Why Bapcor, Ramelius, Sandfire, and WIA Gold shares are rising today

These shares are having a better day than most on Tuesday. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors started the week off in a good mood today.

Read more »

Excited couple celebrating success while looking at smartphone.
Share Gainers

Why Bellevue Gold, Bubs, Clarity Pharmaceuticals, and Regal Partners shares are rising today

These shares are starting the week on a positive note.

Read more »

Two people lazing in deck chairs on a beautiful sandy beach throw their hands up in the air.
Travel Shares

Guess which ASX All Ords travel stock just rocketed 17% on an earnings upgrade

Investors are piling into the ASX All Ords travel stock today. Here's what's happening.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »