[Update on 9 May: The 20:1 share consolidation went ex-entitlement on May 7, with the record date on May 8.]
Seatrium has received in-principle approval to undertake a share consolidation of every 20 existing share into 1 ordinary share.
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If you’re a Seatrium shareholder, you may be wondering what is going on, is this good or bad news, and what should you do. We hope to answer your questions here.
Seatrium share consolidation: What will happen to my shares?
Every 20 existing shares you own will be consolidated into 1 share. Any Fractional Entitlements will be disregarded.
For example, if you currently have 45,530 shares, you will have 2,276 shares after the consolidation.
If you own fractional Seatrium shares, take note!
Seatrium intends to aggregate and dispose of the fractional entitlements arising from the share consolidation, including the fractional entitlements of affected shareholders. The proceeds arising from such sales will be distributed on a pro-rata basis to Shareholders based on their holdings of existing shares.
Shareholders will receive such proceeds in cash credited to their Securities Accounts maintained with the Central Depository (CDP) in proportion to the number of Existing Shares held by them as at the Record Date.
While Seatrium has not shared the calculation of the proceeds or whether any transaction fees will be deducted from the proceeds or born by Seatrium, investors should not spend too much time on it as the proceeds would not be meaningful.
To illustrate based the example above, if you had 45,530 shares, a division by 20 would provide you with 2,276.5 shares. Instead you received 2,276 shares and the remaining 0.5 shares which is worth 81 cents (being 8.1 cents x 20 x 0.5) based on the last traded share price will be distributed in cash to you.
If you held less than 20 shares in Seatrium before the share consolidation, you would have only a fractional entitlement, i.e., less than 1 share. Therefore, you will receive the proceeds from the sale of your fractional entitlement.
Consequently, shareholders who hold less than 20 shares as at the record date will not be entitled to any consolidated shares and will no longer be shareholders upon the completion of the consolidation.
What do I have to do?
Seatrium has received approval from SGX to proceed with the share consolidation and will next seek shareholder’s approval at the upcoming AGM on 26 April 2024.
As it would be an ordinary resolution, 50% votes for the resolution will be required to pass the resolution.
All shareholders will be allowed to vote, including Temasek Holdings, the largest shareholder with approximately 35% interest in Seatrium.
The record date and stock split date will be announced after the resolution is approved at the AGM.
The payment date for the proceeds from the fractional entitlements will also be announced later on.
Shareholders should wait for the letter to shareholders which is part of the AGM pack (and includes other documents such as the annual report) to be sent by Seatrium. The letter to shareholders will provide the final pieces of information not yet provided.
What do I do with my odd lots?
Seatrium intends to make arrangements with brokers to provide brokerage services for the trading of odd lots arising from the Proposed Share Consolidation.
Further details on the brokerage services will be set out in the letter to Shareholders.
Should I buy more shares to increase my no. of share before the record date is announced?
If you don’t want to have to deal with odd load, you may be thinking of purchasing additional shares. This can be done in the odd lot market after details are provided.
But take note!
This should not be treated as an investment opportunity to buy a substantial amount of shares as the open market would serve that purpose.
Why is Seatrium doing a share consolidation?
1) Improve Perception of the company
Seatrium is not a penny stock.
Seatrium’s current market cap is $6.2 Billion, easily placing Seatrium in the Top 30 of listed companies on the SGX by market cap.
A share price of 8.9 cents may make investors think that it is not doing well and is merely a small cap.
A higher share price generally makes shares more attractive to investors. Additionally, it may facilitate corporate actions and increase market interest and activity in the shares.
Most importantly, it may attract more institutional investors and allow for the stock to be included in more major indices. A well known and well regarded company will also be in a better position to win more business deals.
As Seatrium has a substantial market cap, it is worth noting that Seatrium is not affected by SGX watchlist requirements on share prices.
2) Reduce volatility and reduce punting
Seatrium have traded in the range of S$0.081 and S$0.146 in the past six months.
Lowly-priced shares are generally more prone to speculation and market manipulation, which may result in excessive share price volatility.
It may also be easier for punters to bid up and sell down the share price of penny stocks on days with lower trading volume, adding volatility to the share price.
Share Consolidations are not all bad
Although share consolidation and share splits are theoretically just a reshaping of the current pie into different proportions, many investors do not view it this way and this is an important mindset to be aware of.
Investors view share splits as a sign that share prices are likely to continue to rise which necessitates the share split. On the other hand, investors view share consolidations in a dim light as the shares may possibly continue to fall, similarly necessitating the share consolidation.
However, this is not the only factor that investors should consider and investors should always consider all other aspects in totality to make a complete assessment.
For now, Seatrium shareholders will have to wait for your AGM pack which should contain more details on the share consolidation. In the meantime, you might want to re-evaluate if your initial investing thesis for the company still holds.
