Stocks on the NSE to trade as low as 1kobo

SEC approves par value rule for stocks

…Stocks to trade as low as 1kobo

The Securities and Exchange Commission (SEC) has approved the par value Rule submitted to apex market regulator by the National Council of The Nigerian Stock Exchange (NSE) on March 5, 2015.

SEC on June 2, 2015 had noted that the rule becomes effective, a move at which market factor is to determine the price of stocks.

With this new rule, quoted companies on the main board of the Exchange are allowed to trade below their nominal value or par value of 50 kobo.

This is sequel to the draft rule submitted (for stakeholders' comment) by the Rules and Adjudication Committee of Council of the NSE on October 21, 2014.

The Rule states that, "notwithstanding its par value, the price of every share listed on The Exchange shall be determined by the market, save that no share shall trade below a price floor of one Kobo per unit (N0.01).”

The bourse NSE is yet to officially communicate when the implementation of the Rule will commence but speculation is ongoing over those stocks that are currently trading at par value.

At least a quarter of quoted companies may drop to as low as one kobo as the NSE over the approved rule as the  new pricing rule will remove the stopgap that had supported the stocks at their nominal value of 50 kobo.

Most of these stocks are in the non-bank financial services subsectors, may be affected by the new pricing rule, which favours market forces to determine share price, irrespective of the nominal value of the company.

Nearly all the 50 companies have been stagnant at their nominal value for years and are currently not on demand.

Many stakeholders have expressed supports for the new rule, which they said is in tandem with the market’s principle of demand and supply as price-determinant at the stock market.