By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Fidelity Bank (Bahamas) is mulling a five-for-one stock split due to its present share price, its chief executive has revealed, with the long-awaited move finally set to happen this quarter.
Gowon Bowe told Tribune Business that the BISX-listed commercial lender is eyeing an increased stock split beyond the three or four-for-one initially eyed so as to bring the share price comfortably inside the $5 range it is targeting.
Fidelity Bank (Bahamas) share price closed at $17.50 last night and, as it hovers close to $18, he added that a greater split may be necessary. Mr Bowe, who confirmed that shareholders were briefed on the plans at the bank’s recent annual general meeting (AGM), said the the legal work is “nearly completed” and the necessary regulatory filings to give effect to the stock split are “going to be completed this quarter”.
He added: “It may be five-for-one because the share price is near $18. A four-for-one would put it at $4.50, and the whole point was really to have it under $5. If we split at $4.50, any price increase carries it to the $5 mark, so we are mulling a five-for-one.”
Fidelity Bank (Bahamas) is not the only BISX-listed firm planning a stock split. Family Guardian, the life and health insurer, yesterday confirmed that it is initiating a three-for-one stock split, where current shareholders gain two extra shares for each one they currently own, as of September 1, 2023, for investors of record as at August 15.
Stock splits are nothing new to the Bahamian capital markets. Commonwealth Bank, FOCOL Holdings and Cable Bahamas are just a few of the other BISX-listed companies to go down this route in the past. They are typically done to make an in-demand stock more affordable to retail investors, in particular, as well as broadening liquidity, boosting trading volumes and expanding the investor base.
Mr Bowe, meanwhile, acknowledged that Fidelity Bank (Bahamas) share split had been a while coming, but said it was due to a combination of the required legal work, updating the bank’s 45 year-old memorandum and articles of association to ensure they met 21st century requirements, and management’s focus on its 2022 audit and other matters.
“I tried to say to the shareholders it’s best to keep the bank running well so the share price continues to rise rather than focus on the share price and it stops,” he added. As to the benefits of the move, Mr Bowe said: “We recognise we’re a publicly-traded institution, and therefore shareholders have a right to issue their views on how the bank should manage its corporate affairs.
“While our management team knows it [a stock split] doesn’t intrinsically change the value of the shares, investors deserve to have it happen. From that perspective, our fiduciary duty is to hear their views and carry out their wishes. There’s nothing debilitating by doing it. It’s not a case of shareholders requesting something reckless and us resisting it in the best interests of the company. It’s one that has no harm being done, so if it’s the wish of the shareholders it’s our responsibility to carry it out.”
Comments
ExposedU2C 1 year, 4 months ago
Most Bahamians do not understand and appreciate that a stock split adds zero value to the issuing enterprise. All it does is make the stock more affordable for the most gullible retail investors who are all too easily duped into buying from smarter investors at the inflated prices the stock split creates because of the increased post-split demand that the lower share price creates. Put another way, an enterprise that increases the number of its shares by issuing additional shares for no consideration receives nothing of financial value to enhance its true valaue. When it comes to investing in stocks, the true value play is always much more valuable then the illusionary momentum value play. That's just investing common sense 101.
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