[2008-07-25]  Stock splits to ease scarcity of Baroda, UCL shares
Shareholders in Uganda Clays Limited and Bank of Baroda are discussing how to reduce the prices at which their shares can be sold to the public.

Both companies are planning to execute stock splits at the Uganda Securities Exchange, where shares are traded, before the end of the year. A stock split is a corporate action in which a company’s existing shares are divided into multiple shares to increase their number but maintain their value.

The impending splits are set to ease the scarcity of high value shares at the Exchange, stockbrokers have said. The ease will facilitate the fast exchange of both Uganda Clays Limited (UCL) and Bank of Baroda Uganda (BOBU) shares, between sellers and buyers because of affordable pricing, at the stock market. The two firms’ shares are the highest priced on the USE.

For the past four months, a stock supply squeeze on the counters of both the construction material company UCL, and the bank at the bourse has resulted into low trade of shares, pushing their prices through the roof.

The price of UCL has shot from Shs5, 375 per share at the beginning of the year to 10,160 as of July 22 while Baroda has risen to Shs4,425 from Shs2, 265 in January. The most expensive stock on the USE UCL at about Shs10,200 per share.

In an interview, Mr Davis Gathaara The head of Sales and Trading at Mbea Brokerage Services said the planned stock splits will diversify investment options for buyers at the bourse as well as increase the exchange of shares.

UCL is considering a stock split of up to 1000 times, the current share price (Shs10, 160). This means the current price of the shares could reduce to as low as Shs10 depending on the out come of the company’s extraordinary general meeting, due on Monday, July 28.

Mr Gathaara said Baroda’s shareholders have already approved a 10 times stock split of their shares meaning that each share will be valued priced at about Shs400. This split would increase the current Baroda shares from the current 40 million to 16 billion shares.

The UCL board has recommended to its shareholders that the shares be valued at Shs100 but some shareholders prefer to have a lower price. If an agreement on the price which the board has is reached upon. The number of UCL shares would swell to 900 million from the current 9 million.

These shares will be in addition to New Vision’s new 25.5 million shares that are being traded as rights, and are due for listing on September 8th. In 2004, when the New Vision was listed, 51 million ordinary shares were issued to the public.

Mr Gathaara, a dealer in shares, recommended a quick approach to UCL’s stock split citing serious competition for investment from another imminent local and mega Initial Public Offering (IPO). “Delaying the stock split further could continue to depress the price further and frustrate people,” he said.

He added that some shareholders are constrained to sell their shares and invest their money elsewhere like in the up coming National Insurance Company (NIC)IPO.

“But they cannot because the prices of the shares are too high for buyers.” Insurance firm NIC has been reported to be in the final stages of its IPO procedures and could issue its first shares at less than Shs300 per share, to the public before the end of this year.

“A split will increase the number of shares in the market, at an affordable price and encourage more people to invest in the stocks. The split will also offer investors the diversification that investors have been looking for,” added Ms Anita Matovu, the head of research at Mbea.
Source: © 2008 Monitor Publications Ltd