Why Seplat won’t do stock split – Sources

Seplat Energy is not going to do a stock split in the near future, according to sources familiar with the matter.

At N5700 per share, Seplat remains the most expensive listed share on the Nigerian Exchange, driving calls among traders on the NGX that a Seplat stock split would lead to increased liquidity of Seplat shares and improved investor accessibility.

However, from all indications within the group, a stock split strongly misaligns with the oil and gas group’s corporate goals and objectives. One source highlighted that the company is concerned with the potential dilutive impact of a stock split on the intrinsic value of its shares.

While a stock split does not reduce a shareholder’s ownership percentage in the company, it can create the perception of a decline in the shares’ intrinsic value, potentially triggering impulsive buying or selling among investors. For example, in June 2024, VFD Group almost suffered a PR nightmare after their 4-for-1 bonus share issuance led to investors questioning why “the share price fell from N202 to N40”. For Seplat, any action that may spook investors on the London Stock Exchange is not welcome to management.

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Given that the majority of Seplat Energy’s stock market activity occurs on the London Stock Exchange (LSE), where the company is also listed, the management prioritises the interests of investors in this market. While the stock has a pricing of N5700 per share on the NGX, it goes for GBP 200 per share (£2 per share) in LSE.

Hence, while a 5-for-1 stock split may bring Seplat’s share price to N1,140 per share on the NGX, it would lead to a share price of £0.4 per share on the LSE, a dangerously low price on the LSE.

Over the past 30 days, Seplat has had an average trade volume of about 351,000 shares, on the NGX, it was about 216,814 shares. Thus, while for NGX investors, a stock split sounds interesting as it would likely lead to increased liquidity of the stock, Seplat is more active on the LSE.

On the NGX, Seplat appreciated by 150 percent in 2024, however, on the LSE, it appreciated by 60 percent. This discrepancy in price performance highlights the differing dynamics between the Nigerian and the London market. While Seplat’s investor base in the NGX is spurred by the stock’s ability to provide a hedge against Naira’s volatility, on the LSE, Seplat is simply viewed as a stable dividend-paying oil and gas company.

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Analysts suggest that maintaining a high share price is strategically important for potential equity financing needs. Following its recent $800 million acquisition of Mobil Producing Nigeria (MPNU), Seplat Energy is anticipated to face substantial capital requirements in the future, for which a strong share price could prove advantageous.