The story of AIICO Insurance Plc (AIICO) started on 11 June when the company announced it will not pay dividend to shareholders for the year ended 31 December 2019 to the dismay of shareholders who were waiting for the company’s dividend proposal which has become a usual phenomenon.
So, instead of receiving the pleasing dividend announcement, shareholders received the news of share bonus in the ratio of 1 new share for every 5 held.
This should be an interesting announcement, because Shareholders will get free shares, right? Well it would have been, if it were not accompanied by rights issue offer in the ratio of 5 new share for every 13 held.
However, investors on Thursday decided to ignore the handwriting on the wall, which is the obvious dilution of the company’s outstanding shares. This dilution will in turn affect the future dividend payment adversely except the company stepped up its game in terms of profit after tax and EPS.
The fact about share dilution seem to have been ignored by investors as the share price rose by 6.3% from N1.11 on 10 June to N1.18 on 11 June, at one time during the trading session on that day hitting the maximum allowable daily gains of 10%.
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However, after a long weekend, investors seemed to have had time to think over their positions on the stock and that was made clear on Monday 15 June.
The Share price of AIICO slumped by 9.32% from N1.18 to N1.07 on 15 June. The loss was extended by another 9.35% to close N0.97 per share on Tuesday 16 June, after the company announced the rights issue price to be N0.80 per share and extended the qualification date for the share bonus.
On Wednesday, investors suffered another 8.24% loss, as the share price dropped to N0.89 per share.
So, lets put this into perspective using the investors who bought AIICO share on 11 June at N1.18 as an example. If the investor is still holding the shares as the close of trading on Wednesday 17 June, he/she is losing 24.58% of the invested amount. Thus, if the invested amount was say N100,000, the loss will amount to N24,580 in just 3 trading days.
The Graph below shows share price movement from 10 to 17 June
The 52 week high price of AIICO is N1.20 and the 52 week low price is N0.60.
Written by;
Ikueze Ifunanya
