The prices of quoted shares of some companies at the Stock Exchange remain high for the second week running. Although some of the prices have shown sign of decline, they are much higher than what they were, previous weeks.
There is a controversy as to what actually influenced the prices to shoot up some weeks ago. As reported in this page on July 2, 1987, the price rise ws attributed in some quarters to the foreign date link of the Nigerian Stock Exchange with the London, New York and Tokyo Stock Exchanges. The argument is that as a result of information flow from these linkage, it was discovered that the quoted prices of the Nigerian companies were too low to meet the internationally quoted prices of some of these companies whose parent bodies are in these other stock exchange centres.
Some quarters have reasoned that since the Nigerian Stock Exchange has gone into link without other international exchange, the prices of Nigerian Securities have to go up in line with the international prices of stock and most particularly as these companies quoted on the Nigerian Stock Exchange are multinationals that are also quoted in the London, New York and Tokyo Stock Exchanges
It is also said that price rise of shares was necessary to increase the market capitalisation of these companies. This argument follows the observation that the price earning ratio of the Nigerian companies were too low. In developed countries, it take an average of 15 – 17 years to realise the invested capital but here in Nigeria due to low quoted prices of stock it takes on average of five years to achieve what others achieve in 15 years.
This make dividends declared by companies in Nigeria to e very high. Although dividends are incentives for investment, too high dividends are not economically feasible. Some par of such dividends ought to be used for further investment to prop up business activities and boost the economy.
This school of thought argued that it is fast becoming a practice for gifts items to be purchased for shareholders at the annual general meeting. It is a poor practice and a devious design for the management of such companies to perpetuate themselves.
Shareholders are supposed to go to annual general meetings and hear how their companies have performed. If they are not satisfied they vote out the boards and call for removal of incompetent managers. By accepting gifts at the annual general meetings shareholders lose sight of the over all objective of annual general meeting.
Some shareholders come to see AGM as gift presenting ceremonies and when such gifts are not forthcoming, they resort to violence.
Gifts at AGMs are hush up presents meant to buy over shareholders. The Nigerian shareholders should resist the temptation of gift items at AGM of their companies and stand firm on policy issues. What should interest stock holders is that profit level that would keep their companies in production, prevent lenders from taking over their companies and maintain the net asset value per share of the companies.
Enterprise Zone has learnt that the Exchange Commission is worried over the claim by the Nigerian Stock Exchange explanation for price appreciation for share that companies asset were revalued to reflect the current value of the companies.
As at today, most of these companies quoted price at the stock exchange are far below their net asset value per share. The net asset value per share of First Bank for instance is said to be N80 but as at Thursday last week, the share were priced at N4.98. This has clearly shown that it is currently under priced just like other companies.