Shares in Magellan Financial Group Ltd (ASX: MFG) are sinking today and now trade around 1% lower at $16.16 apiece.
Investors continue selling Magellan shares today despite the fund manager announcing a fairly important update.
Magellan is now trading at a deep discount relative to the benchmark S&P/ASX 200 Index (ASX: XJO). The spread of this gap continues to widen in 2022.
It also trails the S&P/ASX 200 Financials Index (XFJ) by a similar amount over the past 12 months.
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What did Magellan announce?
Magellan says its board has decided to proceed with a "pro rata non-renounceable bonus issue of options to eligible shareholders".
The issue is for nil consideration, in other words, at no extra cost to shareholders.
Hamish McLennan, Magellan's Chairman, said the options could be a value-add to investors – a welcomed call in such dire times for the stock.
"We believe the bonus issue of options at no cost to shareholders, and the $35.00 exercise price and 5-year term, provides a potential source of value for our shareholders," McLennan remarked.
The firm notes its decision is in line with language in its interim results on 18 February, forming part of its capital management strategy.
"Eligible shareholders will receive one (1) Option for every eight (8) shares held at 5:00 pm (AEST)
on 7 April 2022," Magellan noted.
"Each Option will provide shareholders with the right – but not the requirement – to purchase one Magellan share at an exercise price of $35.00 per Option, expiring on 16 April 2027," it added.
The issuance will trade under the ticker "MFGO" if successfully quoted by the ASX, and is expected to be issued on 14 April, per the release. A prospectus will follow to shareholders on 21 April.
Magellan share price summary
It's been a difficult time for Magellan shareholders of late, with 24% erased in value since trading resumed in 2022, and a 77% loss over the past 12 months.
