The stock of diversified utility DTE Energy (NYSE:DTE) fell as much as 17% in trading today. Or perhaps the shares were up about 1.5%. Neither one is quite right, actually, and it all relates to a corporate action. Here’s what you need to understand to make sense of DTE Energy’s price action today.
First things first: DTE Energy is a holding company that owns a number of different assets. The big ones are an electric utility with 2.2 million customers and a natural gas utility with 1.3 million customers, but there’s some “other” stuff thrown in, including energy marketing and trading, among other things. Within that other category used to be an ownership interest in DT Midstream, a nonutility business that operates in the midstream energy sector. DTE Energy previously announced that this business would be spun off to shareholders, and today that transaction was finally completed.
DTE Energy shareholders received one share of DT Midstream for every two shares of DTE Energy that they owned. No fractional shares were issued, so shareholders who would have received them effectively were paid in cash instead. Corporate actions like this one don’t play well with stock price services because they are unusual events.
The problem is that the price of DTE Energy needs to be adjusted lower by the value of the DT Midstream shares that were distributed. So if you look at the unadjusted closing price for the previous trading day (around $130 per share) and compare that to the current price (around $111 per share at roughly 2:30 p.m. EDT), which is adjusted for the DT Midstream share dividend, DTE Energy is down notably. But if you adjust the previous closing price to account for the share dividend (resulting in a closing price on June 30 of around $110 per share), DTE Energy is basically flat today to a touch higher.
For better or for worse, that type of math can confuse automated quote systems that are used to getting the same basic price data all the time. In fact, these types of one-off changes can even require human intervention to sort out.
At the end of the day, however, investors aren’t really any better or worse off today than they were yesterday. It’s just that today, for every two shares of DTE Energy they own, they also own one share of DT Midstream. Add the two together and the value should come pretty close to the unadjusted closing price of DTE Energy yesterday.
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