Response to the following problem:
Share split at Pennon Pennon Group plc owns South West Water Ltd, the business that provides water and sewerage services to the far south west of England, and Viridor Waste Ltd, a waste management business. In July 2006, Pennon Group plc decided to split its ordinary shares. Each share with a nominal value of 122.1p was subdivided into three new ordinary shares of 40.7p per share. This meant that each ordinary shareholder became the owner of three times as many new shares, with each share having a market value of one-third of each of the old ones.
The reason given by the company was as follows: In recent years the price of the company's ordinary shares has risen to the point where they are now one of the most highly priced ordinary shares compared with comparator companies quoted on the London Stock Exchange. It is hoped that the share split will lead to increased market liquidity of the company's shares.