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Afribank Set to Move into NSEâââÃ

Category: Investors NewsBeat

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Afribank Set to Move into NSEâââÃ

November 22, 2007


Investors in Afribank Nigeria Plc shares eagerly await the conclusion of its on-going public offer which should see the companys market capitalisation (MCAP) earn it the membership of the exclusive Top 10 most capitalised stocks on the Nigerian stock Exchange.


Market capitalization, or market cap, is a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. It is obtained by multiplying the number of shares outstanding by their current price per share, providing a total value for the company\'s shares and thus for the company as a whole.


As owning stock represents owning the company, including all its assets, capitalization could represent the public opinion of a company\'s net worth and is a determining factor in stock valuation.


For example, if a company has 15,000,000 shares outstanding and a share price of N20 per share then the market capitalization is 15,000,000 x N20 = N300,000,000.


Stock market analysts recognize four market cap divisions: Large Cap (usually N500 billion and above), Mid Cap (usually N250 billion to N500 billion), Small Cap (usually between N100 billion and N250 billion), and Micro-Cap (usually below N100 billion); although the cutoffs between the categories are not precise or fixed.


Market capitalization represents the public consensus on the value of a company. A corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company\'s shares.


For some quoted companies on the Nigerian stock exchange, there exists a dominant shareholder, typically a founder, CEO or a family. Like most stock market indices, this is often adjusted for by working on a \"free float\" basis, i.e. the market cap is the value of the publicly tradable part of the company.


It will be well for investors to note that market capitalization is a market estimate of a company\'s value, based on perceived future prospects, economic and monetary conditions, and therefore largely independent of a company\'s history.


Stock prices can also be moved by speculation about changes in expectations about profits or about mergers and acquisitions.


It is possible for stock markets to get caught up in a trend, like the current steep rise in valuation of bank’s stocks which is principally driven by the repeated recourse to the markets to raise fresh funds which ensures its market capitalisation increases through volumes (just as the prices does).


Post offer, Afribank would move up based on the November 14, 2007 market position. This, investors believe should improve as the market responds to the impressive returns and increasing market presence of its products and services.

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