Lasco stock split could be a win for shareholders

In a month’s time, when a 10-to-one stock split is considered, shareholders could see good returns on their stock.

The companies, which both listed at $2.50 a share on the Jamaica Stock Exchange (JSE) in late-2010, have seen tremedous price appreciation up to now.

Lasco Manufacturing peaked at $14.99 a year after going public, right around the time Lasco Distributors reached $16.

Since then, their share prices have declined. Manufacturing closed at $11.95 on Friday, while Distributors closed at $10.50.

Stock splits increase companies’ shares by dividing existing stock units into a multiple, such as 10 new shares for every one, as in the case of Lasco.

The price of each new share is set by dividing the current price by the multiple, so that the overall value of all the shares are the same before and after the split.

But the higher number of shares means greater liquidity, which tend to lead to an increase in trading in the shares.

The lower price also impacts investors’ psychology in such a way that the market tends to send the price up.

One of the most recent stock splits on the local market — Access Financial Services’ 10-to-one split in April 2010 — saw the share price increase from $3.49, where it was set after the split, to as high as $6.10 before the year was out.

The share price did fall again, albeit not below the split price. Then again, Access closed at $7.50 last Friday.

But even before the split, the company’s share price climbed from its listing price of $18.34 (the equivalent to $1.84 after a 10-to-one stock split) to $34.85 on the last trading day before the split.

However, prior to the split, trading in Access’s stock could have been categorised as sporadic with trading taking place on average once every four days.

The ensuing months hardly saw a day without the stock crossing the exchange floor.

Lasco Manufacturing and Lasco Distributors will each hold an extraordinary general meeting on June 26 at the Knutsford Court for shareholders to “consider the recommendation to split the shares of the company by subdividing each share into 10 new shares”.

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