U.S. exchange operator CME Group, battling to shore up trading volumes amid new competition, has declared a five-for-one split of its common stock in a bid to attract to new investors.
The exchange operator, which owns the 164-year-old Chicago Board of Trade and offers trading on assets from oil to interest rates, said the split would take the form of a 400 percent stock dividend to be paid on July 20 to shareholders of record on July 10.
"We believe that splitting CME Group stock will appeal to a broader, more diverse mix of investor portfolios," Executive Chairman and President Terry Duffy said in a statement.
"By making our shares attractive to more people, we have potential to further expand the base of ownership."
The move came after shareholders complained at the CME's annual meeting on Wednesday about a drop in the share price.
CME shares have sagged amid concerns about lackluster trading volume and regulatory uncertainty, with year-to-date volume through the end of April down by 10 percent from a year earlier.
CME stock closed up $2.65 to $256.16 on Thursday, down 11.7 percent from a year earlier.
The split "shouldn't theoretically have any effect on the stock price," said Rich Repetto, analyst for Sandler O'Neill. It will help people buy and sell the stock because there is more liquidity, he said.
One shareholder at the annual meeting blamed a recent decline on CME's failed bid for the London Metal Exchange. CME pulled out of the bidding earlier this week.
Duffy declined to comment on the LME at the meeting, but blamed the recent weakness on what he said was a misperception that a new designation of CME as a "systemically important" institution would force the company to come up with new capital to guard against failures of its top customers.
CME has increasingly faced questions about oversight since the collapse of brokerage MF Global, whose failure on October 31 rocked the futures industry and hurt volume at CME.
CME was an auditor of MF Global, and former clients of the brokerage are still missing an estimated $1.6 billion.
The exchange also faces new competition, with rival IntercontinentalExchange Inc challenging its U.S. grain futures business, launching wheat, corn and oilseed contracts.
Though ICE has not succeeded in attracting much business for the contracts since they launched last week.
CME executives had formerly been cool to the idea of a stock split, saying they were comfortable with their large institutional shareholder base and saw no need to make the shares more affordable to smaller holders.
CME executives were regularly queried about a potential stock split before the financial crisis, when shares were trading at much higher levels. At the shareholder meeting on Wednesday, the issue was not raised.
(Additional reporting by Ann Saphir; Editing by Carol Bishopric and Ed Davies)