Price Swings as UCAP Funds Share Capital Addition from Retain Earnings
Investment banking firm, United Capital Plc, Ticker: UCAP stock market price declined by about 69% after the company’s bonus shares and increase in share capital were funded with its retained earnings.
The company’s numbers showed that N10.8 billion was used to pay dividends to shareholders, while another N6 billion was used from retained earnings to fund an increase in share capital.
With the plan to increase its share capital, the company’s 2 for 1 bonus shares offered to shareholders as of July 31, 2024, increased outstanding shares to 18 billion from 6 billion, causing its market price to adjust downward.
As a result of the increase in outstanding shares in the equities market, the company share price fell from N31 on July 31, to N11.05 on August 1, just a day after the bonus share offer ended.
This happened after the investment banking firm’s stock market price was marked down to N10.30 on August 1 for dividends paid. The movement in the investment banking firm’s price suggests a change in its stock number.
The Nigerian Exchange stock price movement rule caps daily price adjustments at 10%. In an explanatory note, the first investment bank to be listed on the local bourse said it witnessed tremendous growth year-on-year and has consistently delivered significant returns to its shareholders.
According to United Capital, the management desire is to sustain this trajectory through expansion and consolidation in the financial services industry. The explanatory note hints that the board considered and approved an increase in its share capital from the current N3 billion to N9 billion to make the company more competitive in the capital market.
United Capital Plc told the Nigerian Exchange that the increase will be funded through the issuance of bonus shares out of the retained earnings to increase the paid-up capital to N9 billion.
The board of directors offered shareholders two bonus shares for every share held. This bonus dividend was issued to qualifying shareholders by the close of business on July 31, 2024.
Effectively, the company has recapitalized its retained earnings by funding its additional shares created with bonus issue instead of cash dividend. The bonus issue was funded through capitalization from the Retained balance of N7.453 billion, as provided in its 2023 audited financial statement.
The investment bank sets aside N6 billion from the Retained Earnings amount for distribution amongst the members on the Register of Members at the close of business on July 31, 2024.
The earnings distribution was anchored on the condition that the same would not be paid in cash. The amount from the retained earnings would be used to pay for 6,000,000,000 ordinary shares for capital adjustments.
#Price Swings as UCAP Funds Share Capital Addition from Retain Earnings Regency Asset Management Leads NGX Top Ten Brokers Performance
