Is Lasaco overvalued? Investors are dumping its shares for cheap

Despite reconstructing its total shares to look appealing to investors, existing shareholders are dumping their holdings in Lasaco to protect their losses – this shows the management’s strategy is not achieving one of its targets.

Lasaco had began its share reconstruction on February 1, with the exercise lasting for three weeks. During the period, the insurance company had paused trading on its shares in order to arrive at a new improved price value with reduced outstanding volume of shares.

Upon its return, the share price which was paused at N0.42kobo per share on January 29, resumed with an improved value of N1.68kobo per share on Monday, February 22, while outstanding shares shrunk to 1.834 billion ordinary shares, from 7.334 billion ordinary shares.

It almost seemed like the shareholders were waiting for trade resumption on Lasaco to cut their losses. Tracking by Ripples Nigeria showed the company’s investors have been dumping their shares.

Read also: Investors’ confidence in Nigeria’s stock market at lowest ebb as equity capitalisation drops to N21tr

Existing investors dragged Lasaco’s share price down to N1.52kobo at the close of market on Monday, from the N1.68kobo per share it opened with. On Tuesday, it plunged further to N1.37kobo per share as investors continued to engage in a massive sell-off.

On Wednesday, the share price dipped even more to N1.24kobo per share. According to Ripples Nigeria analysis, this means Lasaco’s share price has lost N0.44kobo since the Nigerian Stock Exchange (NSE) relisted Lasaco’s shares on Monday, February 22.

Ripples Nigeria had reported that the suspension placed on Lasaco’s shares between January 29 and February 19, had prevented some investors from running for the door.

Why are investors dumping Lasaco’s shares?

It should be noted that the reason Lasaco conducted its share reconstruction was because its share was not getting closer to the required price at the trading floor, which is N0.20kobo – this price gets a company delisted from NSE.

Lasaco was heading towards a stage it will earn a risky investment tag before its share construction, so its share price had been losing value in the eyes of the investing public and existing investors had been dumping Lasaco’s shares for cheap before February.

The share reconstruction was meant to assure investors that investing in Lasaco is a wise investment move, but with falling share price, it seems investors are not buying the damage control of Lasaco’s management.

Confidence is low among investors buying and selling Lasaco’s shares, this is why prospective investors are pricing Lasaco’s share at a cheap rate, and existing investors are willing to sell for cheap. It does seems, therefore, the investing public sees Lasaco as overvalued following its share reconstruction.

By Fakoyejo Olalekan…

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now