Share consolidation-A case of companies on the Lusaka stock exchange

20 Apr

It was a very exciting friday for me. I had been watching the stock market but this friday was something special. For the first time since I began watching the figures, a particular company’s stock had risen from ZMW0.61 per share to ZMW 30.5 (An amazing 4900% rise!). I immediately picked up the phone and began dialling and texting friends who had shares in this company at the time. Everyone could not believe the price rise. It was an exciting weekend until something burst the bubble.

The about 4900% increase in share price was not really a real increase. It was a share consolidation.. In simple terms, a share consolidation works as follows:

Imagine you have 100 shares in company A at ZMW 5 (Approx $1) per share. The total value of your investment is 100 x ZMW5 = ZMW 500 (Approx $100). In a share consolidation, your 100 shares would be converted to say 20 shares at a price of ZMW 25 (Approx $5) per share. Therefore if you just wake up (like I did on that day) and see a price of ZMW25 instead of ZMW5, please confirm with your stock brocker if it was not a share consolidation. That is how my bubble got burst on that exciting weekend.

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