Aamal Company, one of the most diversified conglomerates in Qatar, is considering a stock split, whereby each share will be subdivided into 10 shares, a move that ought to make the scrips attractive to retail investors and enhance liquidity.
The stock split will split each share with a nominal value of QR10 into 10 shares, each with a nominal value of QR1, thereby increasing Aamal’s total number of shares from 630mn to 6.3bn, but leaving the total paid-up capital unchanged at QR6.3bn.
Aamal shall undertake implementing the necessary legal amendments to its constitutional documents in accordance with the relevant rules and regulations governing listed companies to comply with the directive of the Qatar Financial Market Authority (QFMA). The date of stock split will be announced soon.
"This market-wide initiative is to make trading in QSE-listed shares more accessible and attractive to retail investors, and to improve liquidity and trading volumes on the Qatar Stock Exchange," the company said in regulatory filing to the bourse.
Once Aamal’s shares begin trading on a split-adjusted basis the number of shares owned by each shareholder will be adjusted automatically by multiplying the current holding of each shareholder by 10.
Shareholders do not need to take any action because of the stock split, which will not affect the company’s market capitalisation or the proportionate ownership of existing shareholders, the spokesman said.
Aamal Company is the third entity to announce stock split. Late last month, QNB, the country's largest lender, had proposed 1:10 stock and Qatar Insurance last year disclosed such a step.
The proposed Aamal stock split will have to get approval through an extraordinary general assembly meeting, for which the legal quorum is the attendance of at least three-fourth of the shareholders.
Aamal'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 its equity, thereby improving the price and valuation of the stock further.
The Article 152 of the new Commercial Companies Act No 11 of 2015 allows 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 about the stock splits so far announced on the local bourse.
"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.