Logistics company, Red Star Express Plc has informed the Nigerian Stock Exchange (NSE) that the company is in need of cash eight months after NSE reclassified the company from medium-priced stock to low-priced stock.
Red Star Express made this known in a filing sent to the stock exchange. The company said it will be raising funds to the tune of N1.33 billion at the stock exchange. The reason for the infusion of fresh capital is linked to financing projects or company plans.
Who will be investing in Red Star? The fundraising on the stock market is not all-inclusive. It is limited to just the existing shareholders. 294.75 million ordinary shares of 50 kobo each will be offered through rights issue at N4.50 per share.
According to report, the rights issue will be pre-alloted on the basis of one new ordinary share for every two ordinary shares held before the close of business yesterday, August 21, 2019. But the company closed trading at N4.24 per share on the NSE; this is below the proposed rights price.
Red Star on downward path? Since Since September 17, 2018, the company’s stock price has been on a nosedive from N5 per share. The fall of the stock price led to its reclassification by the NSE. The capital market relegated Red Star Express from a medium-priced stock to low-priced stock.
Note that there are three categories of quoted companies, high-priced, medium-priced and low-priced stocks, based on their market price.
- High-priced: These are stocks that are priced at N100 per share or above for at least four of the last six trading months. Also, high-priced stocks can be new security listings that are priced at N100 or above at the time of listing on NSE.
- Medium-priced: If a stock trades for at least four of the last six months at N5 to N100 per share, it is classified as medium-priced. Also, medium-priced stocks can be new security listings that are priced between N5 and N100 at the time of listing on NSE.
- Low-priced: When a stock trades between one kobo and N5 for at least four of the last six months, they are called low-priced. Also, if new security listings are priced at one kobo per share or below N5 per share at the time of listing on the Exchange, they are categorised as low-priced. This is where majority of the stocks on NSE falls.
What you need to know: For Red Star Express to make it back to the medium-priced category, stockbrokers would need 100,000 shares to change the share price as against 50,000 shares needed for price change as a medium-priced stock.
Meanwhile, stocks under High-priced category only need a minimum of 10,000 units to have a price change.