Three listed companies adopting share split strategy to boost liquidity & share price

Each existing EB Creasy share to be split into 100

Three companies listed on the Colombo Stock Exchange have announced decisions to subdivide their existing issued shares with no change in their stated capital in what is considered a measure intended, in the view of brokers and analysts, to increase the market liquidity of their shares with prospects to increase their price post-subdivision.

Among those companies that has announced subdivision of shares is old-established EB Creasy and Co. PLC, a member of the Colombo Fort Land and Buildings group, where a subdivision of each existing share into 100 new shares is pending.

The other two companies where subdivisions are pending are CIC Holdings PLC where a subdivision of each existing share into four has been announced and Lanka Aluminium Industries PLC where each existing share would be split into five.

Although there have been share splits since the new Company law came into effect on 2007, brokers and analysts could not recall a share split as big as what is proposed by EB Creasy which concluded its last Annual General Meeting for the year ended Mar. 31, 2020, on Dec. 30. A dividend of Rs. 18 per share (pre-share split) was adopted.

“Given that the company’s issued capital (stated capital is what now applies) was small, the Creasy share which is seldom traded has commanded a very high price on the trading floor of the CSE,” a broker said.

It last traded a few days ago between Rs. 3,150 and Rs. 3,070 with 506 shares changing hands in 34 trades. Its par value per share was Rs. 10 when par values applied. That concept went out with the introduction of state capital under the new company law.

Brokers and analysts said that there is a push-up factor possible in share splits but this has not always worked out.

“Consider an example of a company whose share is trading at Rs. 50 when a split of two new shares for each existing share is announced. Theoretically each new share should then be worth Rs. 25 but it doesn’t always work out that way, depending on market conditions. Shareholders always hope for a favourable movement from such measures,” a broker said.

CIC Holdings which has two classes of shares, voting and non-voting, will divide each existing share into four. An Extraordinary General Meeting has been called for Jan. 5 to secure shareholder approval for the proposed measure. The subdivision will apply to both voting and non-voting shares.

The CIC voting share last traded on the CSE between Rs. 184.90 and Rs. 182 closing at Rs. 182.30 with 57,601 shares transacted in 53 trades. The company paid two interim dividends of one rupee each for the financial year ended Mar. 31, 2020.

At Lanka Aluminium, each existing share will be split into five. Its share last traded at a range of Rs. 112.70 to Rs. 113.30 closing at Rs. 112.70 with 71,059 shares transacted in 119 trades. The company paid a first and final dividend of one rupee for the last financial year.