HLM plc, an all-equity financed business, has just paid a dividend totalling £1.5m.

This amount has been paid on a regular basis for many years, and the market expects this to continue. The business has 10m ordinary shares currently quoted at £1 each.

The directors have identified the opportunity to invest £1m in one year’s time, and a similar amount in two years’ time, in a project that will generate an annual cash flow of £0.4m for ever, starting in three years’ time.

The only possible way of financing this investment is by paying a reduced dividend for the next two years.

If the directors were to announce their intention to make this investment and to publish full details of it and the financing method, what would happen to the share price?

Ignore taxation.