When Oando opened it Rights Issue on December 3rd 2015, its share price was trading at N20. Since then though, the share price has been sliding steadily. The steep fall in its share price opened a wide premium between its rights issue price of N22 and informing the company’s decision to adjust its rights issue price to reflect reality. It did eventually and controversially adjust its rights issue price to N16.5.
Barely three weeks after, the share price has tanked to N12.83 drifting further away from its adjusted rights issue price. In fact at Monday’s price of N12.83 the original rights issue price would have been trading at a 71% premium to this current market price.
Why the share price is dropping?
It’s difficult to understand what is going on and why the share price is dropping. A look at the company fundamentals suggest negative head winds in the coming months. The company posted a loss in its much delayed 2013 results and followed suit with an inconsistent 2014 results. The third quarter of 2014 showed profit after tax of N1.7billion, N14.2b profit in Q2 and N 5.4b loss in Q1. The fall in oil price also dims hope for an improved result in 2014. All of this is bound to make the stock a target for market speculators as investors move in and out of the stock. Despite this, the market volatility has shown that stocks can stage a remarkable rebound after hitting several bottoms. Seplat has shown that already and there is no betting against Oando.