In a rather puzzling turn of events, underwriting firm, Prestige Assurance Plc, has signified its intent to award a bonus issue to shareholders, few days after it concluded a share reconstruction.
An excerpt from the Nigeria Stock Exchange (NSE) weekly report for the week ended 8th of January states that the company had concluded its share reconstruction, and adjusted its price.
“The full suspension placed on the shares of Prestige Assurance Plc (Prestige Assurance or the Company) was lifted on Thursday, 7 June, 2018. The shares of the Company were formerly placed on full suspension from Wednesday, 23 May, 2018 to Wednesday, 6 June, 2018 to enable the Registrars update the register of members, sequel to the share capital reconstruction exercise embarked upon by Prestige Assurance.
“Prestige Assurance has notified The Exchange that the exercise has been completed and the shareholders’ register has been updated. Consequently the suspension placed on the Company’s shares was lifted. The share price was subsequently adjusted to 0.67 kobo.”
Prior to this
Nairametrics had earlier reported the company’s failure to issue a definite deadline regarding the planned reconstruction and questioned the necessity of a share reconstruction in view of the consistent reduction in its negative retained earnings.
That same Friday, the firm sent a notice to the NSE informing the investing public of its forthcoming Annual General Meeting (AGM). Among issues to be discussed, includes the following under special business:
- That the share capital of the company be increased from N2,223,489,000 to N3,000,000,000 by the creation of 1,553,022,000 shares.
- That the directors be authorized to issue bonus shares from its share premium account in the sum of N782,569,517.00, being 41 new shares for every 100 shares held.
This would lead to an increase in the authorized share capital from N1,908,706,140 to N2,691,275,658, by issuing 1,565,139,035 ordinary shares of N0.50 each.
What is the rationale behind reconstructing the share capital and then increasing it subsequently by granting bonus shares?
Why does the firm seem to be in a hurry to do so, barely a week after it had reconstructed its shares?
Have the NSE and other regulators sanctioned this exercise?
The Exchange had few weeks ago, pulled down a notice by the company pertaining to the share reconstruction because it did not provide a clear-cut deadline for the exercise.