Red Star Express plans to offer 294.75 million ordinary shares of 50 kobo each through a rights issue to existing shareholders at N4.50 per share.
The rights issue will be pre-allotted on the basis of one new ordinary share for every two ordinary shares held as at the close of business on Wednesday.
Sources at the Nigerian Stock Exchange (NSE) confirmed the receipt of application for approval of the N1.33 billion rights issue.
Red Star Express is listed on the NSE and is required to obtain necessary approval before additional issuance of shares.
Red Star Express’ share price closed today at the NSE at N4.24 per share, about 5.8 per cent below the proposed rights’ price.
The NSE had in January 2019 reclassified the logistics company from a medium-priced stock to low-priced stock due to sustained decline in its share price.
The Exchange had stated that the review of Red Star Express stock price trade activity over the past six month period provided the basis for reclassifying the security from the medium priced stock group to the low priced stock group.
Red Star Express’ stock price dropped below the N5 threshold on September 17, 2018 and traded below N5 up till close of business on January 17, 2019.
This indicated that Red Star Express stock price had traded below N5 in four out of the last six months. The reclassification took effect on Monday January 28, 2019.
As a low-priced stock, stockbrokers would need 100,000 shares to move the share price of Red Star Express as against 50,000 shares needed for price change as a medium-priced stock.
Also, the tick size for the company will change from five kobo to one kobo, implying that the share price will rise slowly going forward.
The NSE classifies quoted companies into three categories-high-priced, medium-priced and low-priced stocks, based on their market price.
The high-priced stocks consist of large-cap equities that are priced at N100 per share or above for at least four of the last six trading months, or new security listings that are priced at N100 or above at the time of listing on the Exchange.
The medium-priced stocks consist of medium-priced equities that are priced at N5 per share or above but less than N100 per share for at least four of the last six months, or new security listings that are priced at N5 per share or above but less than N100 per share at the time of listing on the Exchange.
The low-priced stocks, where majority of listed companies fall, consist of equities that are priced at one kobo per share or above but below N5 per share for at least four of the last six months, or new security listings that are priced at one kobo per share or above but below N5 per share at the time of listing on the Exchange.
Stocks under high-priced group shall have price change with minimum of 10,000 units; stocks under medium-priced group shall have price movement with a minimum of 50,000 units while stocks under low-priced group shall have price change with minimum volume of 100,000 units.