Business / Companies
Econet board approves a 10 for 1 split in the Econet shares
07 Feb 2013 at 05:49hrs | Views
ECONET WIRELSS yesterday announced that its board of directors had approved a 10 for one split of the company's shares to make the stock affordable to small investors.
At yesterday's closing price of US$6 per share, small investors, if approved, will spend US60c to buy one Econet share.
A share or stock split is when shareholders are issued with new shares at no cost. A split reduces the value of each share, but increases the number of shares by the same proportion.
After a split, the stock price will be reduced since the number of shares has increased.
The share split does not change the company's market value. A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar firms in their sector.
The motive is to make shares affordable to small investors but the underlying value does not change.
Econet's board decision followed a study by the company, which showed that its shares were now too expensive, resulting in only foreigner investors buying them.
It said the level of foreign ownership in the company had shot up from 10 percent at its listing in 1998, to more than 30 percent.
When Econet listed, most of its shareholders were small investors who owned as little as 100 shares, but as the price rose, they have been gradually squeezed out by foreign investors and fund managers.
"Econet still has thousands of small investors, but the founder of the company, Mr Strive Masiyiwa, was apparently not happy that the small investors no longer dominate share activity, and he has personally pushed for the change," said Econet.
A circular on the share split has been published by the company, and with the support of Mr Masiyiwa's holding company Econet Wireless Global, which has majority shareholding, it is most likely that it would sail through.
Meanwhile, Econet Wireless has repeated its call for "urgent reform" of the share trading system of the Zimbabwe Stock Exchange, saying the current system is "subject to abuse and perpetuates an elitist old boys club".
"It is time for the Zimbabwe Stock Exchange to become more accessible to ordinary people, and a proper vehicle for mobilising capital for companies," said the company.
Earlier this week, Econet said it was willing to extend a "no strings attached loan" to the ZSE to acquire an electronic trading platform that allows immediate and transparent settlement, as in other countries such as South Africa and Kenya.
At yesterday's closing price of US$6 per share, small investors, if approved, will spend US60c to buy one Econet share.
A share or stock split is when shareholders are issued with new shares at no cost. A split reduces the value of each share, but increases the number of shares by the same proportion.
After a split, the stock price will be reduced since the number of shares has increased.
The share split does not change the company's market value. A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar firms in their sector.
The motive is to make shares affordable to small investors but the underlying value does not change.
Econet's board decision followed a study by the company, which showed that its shares were now too expensive, resulting in only foreigner investors buying them.
When Econet listed, most of its shareholders were small investors who owned as little as 100 shares, but as the price rose, they have been gradually squeezed out by foreign investors and fund managers.
"Econet still has thousands of small investors, but the founder of the company, Mr Strive Masiyiwa, was apparently not happy that the small investors no longer dominate share activity, and he has personally pushed for the change," said Econet.
A circular on the share split has been published by the company, and with the support of Mr Masiyiwa's holding company Econet Wireless Global, which has majority shareholding, it is most likely that it would sail through.
Meanwhile, Econet Wireless has repeated its call for "urgent reform" of the share trading system of the Zimbabwe Stock Exchange, saying the current system is "subject to abuse and perpetuates an elitist old boys club".
"It is time for the Zimbabwe Stock Exchange to become more accessible to ordinary people, and a proper vehicle for mobilising capital for companies," said the company.
Earlier this week, Econet said it was willing to extend a "no strings attached loan" to the ZSE to acquire an electronic trading platform that allows immediate and transparent settlement, as in other countries such as South Africa and Kenya.
Source - Business
