Thursday, November 09, 2017 10:43 AM / Research
& Investor Services
The “par value” or “nominal value” as
generally referred to is a value assigned for balance sheet purposes.
Thus, it is quite different from the market value of a stock.
The “Par Value Rule” according to Article
100A: Pricing Methodology of the NSE Rules and Regulations Governing Dealing
Members status:
(1)
Notwithstanding its par value, the price
of every share listed on The Exchange shall be determined by the market, save
that no share shall trade below a price floor of one Kobo per unit (N0.01).
(2) “Par value” is the
nominal value of a share as stated in the Memorandum of Association of an
Issuer.
(3) “Price floor” means
the amount below which the price of one unit of a share shall not be permitted
to trade, and the minimum amount which must be paid for a share in the event of
a drop in the unit price of that share.
In clear terms, the new par value rule
simply implies that the prices of stocks most especially stocks trading at
their nominal value will now reflect their true market value.
Thus, market forces will now determine the
prices of stocks except that stock wont trade below a floor price of one kobo
per unit of share.
On how to get rid of penny stocks hovering
at N0.50k, it is advisable for the investor/shareholder to have a discussion
with his/her broker on this before a decision is taken.
More importantly, the broker may
eventually arrive at a decision to help the investor dispose those stocks at a
discount i.e. around 45kobo to 40kobo to encourage early patronage of the
stocks in question.
For further guidance, kindly contact
your stock broker or investment advisor.
Author can be contacted vide research@proshareng.com
Related News
1.
Notification
of Effective Dates of Rules of The NSE - Pricing Methodology and Par Value
Rules
2.
NSE
Proposes Amendment to its Rules on Pricing Methodology
3.
Par
Value Rule Not Yet in Force; Effective Date to be Announced in Due Course
4.
The
SEC, the N0.01kobo rule and the likely implication
5.
SEC
Approves Par Value Rule for stocks to trade as low as 1kobo (N0.01)
6.
SEPLAT's
Share Price Changes NSE's Pricing Methodology
7.
Dealing Members
cautioned on trading below 50 Kobo par value
5732 VIEWS 
Signup with Facebook
Signup with Twitter
