The JSE-listed construction and engineering group Aveng’s share price soared more than 45,000% over a period of time on Wednesday.
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This strong revaluation in Aveng’s share price is related to the restructuring of the group’s authorized and issued share capital by consolidating every 500 shares in one share, starting from the opening of operations on the JSE on Wednesday.
The share consolidation resulted in a reduction from 62.26 billion issued Aveng common shares to 124.5 million shares, while 2.47 billion issued Aveng A class shares were reduced to 4.9 million of shares A.
Later on Wednesday Aveng’s stock was reflected as having fallen 9.37% to close at R27.19 per share compared to its closing price of R30 per share on Tuesday.
Read: Aveng’s Eyes Share Consolidation Mid-December
Rowan Goeller, an analyst at Chronux Research, said that the more than 45,000% increase in Aveng’s share price and subsequent decline were due to a share price adjustment dating back to Aveng’s history to reflect the fewest number of Aveng shares in issue after share consolidation.
Not a penny anymore
Goeller added that Bloomberg’s fact set, for example, will now not show the 3 cents, 4 cents, 5 cents, or 6 cents per share that Aveng’s stock has been trading at for the past year, but depending on where was the share price, it will. be at R25 to R30 per share.
Aveng Group CFO Adrian Macartney announced on Aug. 31 that the group planned to carry out a share consolidation before the end of 2021 to reduce the more than 60 billion Aveng shares in issue.
The massive amount of Aveng shares in issue follows various rights issues by the group in recent years to repair its balance sheet as part of the strategy to return the group to profitability.
The announcement of the planned share consolidation coincided with the release of Aveng’s financial results for the year through the end of June 2021 and the group reported its first major full-year earnings, rather than a loss, since June 2014 .
Aveng shareholders approved special resolutions related to share consolidation by required majority at a company general meeting on November 10.
Aveng provided a justification for the share consolidation in a circular published and distributed to its shareholders prior to the general meeting to approve the proposed share consolidation at that time.
He said the consolidation was proposed because, in the opinion of Aveng’s board:
Stocks trading below R1 have a much higher spread between the offer price to buy and the offer price to sell, which can result in significant movements in the share price in small volumes traded and, in turn, instead, it causes instability in market capitalization. of the company and ultimately affects shareholder value. Therefore, this can discourage potential investors.
By consolidating the number of shares, it is expected that there will be a reduction in the spread between the offer price to buy and the offer price to sell, which will result in a more stable market capitalization of the company and allow an increase in liquidity in the shares. Actions.
Aveng added that the stock consolidation:
Aveng’s prospects after the share consolidation appear to have been attractive to at least one Aveng director.
Aveng disclosed on November 23 that Bernard Swanepoel, one of the group’s directors, had acquired 5.9 million Aveng shares at R0.05 per share for a total purchase price of R295,000 on the market on November 22.
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