QNB, the country’s largest lender, is considering a 1:10 stock split, whereby each share will be subdivided into 10 shares, a move that ought to enhance the liquidity of the scrip and thus help in price discovery.
The face value of QNB shares now at QR10 per piece will be reduced to QR1 after the split, a proposal which will be taken up by the extraordinary general assembly of shareholders, scheduled to be held next month.
QNB is the second entity to announce the 1:10 split after Qatar Insurance last year disclosed such a step.
The capital of the bank, which is QR9.24bn, will be divided into 9.24bn shares of QR1 each.
The agenda for the extraordinary general assembly is “to consider and approve the split of the par value of the ordinary share to QR1 instead of QR10, as per the instructions of the Qatar Financial Markets Authority (QFMA)”, and amendment of the certain provisions in the Articles of Association.
QNB’s move is expected not only to attract small investors in a big way, thereby increasing the liquidity of the stock, but also prompt international and large investors to invest more in QNB’s equity, thereby improving the price and valuation of the stock further.
The Article 152 of the new Commercial Companies Act No 11 of 2015 allowed the nominal value of the share to be between QR1and QR100.
The empirical studies in corporate finance indicate that the stock split is positive and indicates positive future performance, market sources said.
“The proposed move will have an impact on the minds of average investors, who otherwise are waiting in the fringes,” an analyst with a leading bank brokerage house said.
“The stock split will gauge the right intrinsic value as more float will help market forces to determine true price,” an analyst with a leading investment firm said.
Stock split will see shares with lower face value, but total market capitalisation of the stock post-split remains the same.
The move (by QFMA to allow stock split) also comes in the wake of two exchange-traded funds (sponsored by Doha Bank and Masraf Al Rayan), which have been well received by the investors.
QNB Group has steadily grown to be the biggest bank in Qatar and the largest financial institution in the Middle East and Africa region. For the year ended December 31, 2018, net profit reached QR13.8bn, up 5% compared to same period last year.
Total Assets increased to QR862bn, up 6% from December 2017.
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