An investors’ fears in stock market investing is usually triggered when its profits in its socks are threatened.
This can be a nightmare.
[contextly_sidebar id=”vz2rKPgDtz6aaovRKJPpg1M8q3hFKZze”]For shareholders in HFC bank current happenings in the bank will certainly not go down well with them especially over fears it may affect the bank’s performance and in turn its stock on the Ghana Stock Exchange (GSE).
Though the GSE usually reacts slowly to news on companies listed on it, this trend appears to be changing.
Shares of HFC bank during the bank’s wrangling with Republic bank and other shareholders recorded some significant changes.
To be specific from the second half of 2014 to the first two months of 2015 when HFC’s boardroom wrangling deepened there was some noticeable movements in the sale and pricing of HFC stock on the GSE.
As these sale, retention and movements of HFC shares continue the question is -is it time to sell your shares in the bank?
Time to let go of HFC shares?
Well it depends on if you are a short to medium term investor or a long term one.
The share price of stocks are usually determined by the performance of the company as well as the demand for that share which is usually triggered by speculation.
In the case of its performance as a bank this has not significantly had an impact on its share price.
This however changed when Republic came on the scene in 2013.
Its share price hovered around 45 peswes in 2012, moving up slightly from the last quarter of 2013 and climbing up to around 1 cedi 50 peswes around from the second quarter of 2014.
From between September of 2014 to March 2015 for example the share price of HFC bank has hovered between 1cedi 35 peswes and 1 cedi 55 peswes.
From between September 2014 and early this year there was a lot of news around the bank from its board room wrangling, to court battles, Republic bank’s mandatory share offer and a botched Extraordinary General Meeting (EGM) among others.
In this case the bank’s troubles played a significant role in its share performance as speculative activities trigged its price to go up close to the Republic bank’s offer at 1cedi 55 peswes.
Republic bank is offering 1 cedi 60 peswes to shareholders of HFC bank.
Short to medium term investors in HFC bank
So a short-medium term investor will be better off in doing what i call the 60 -40 exit plan.
That is keep 40 percent of its shares in the bank while selling 60 percent of his/her shares at the 1 cedi 60 peswes being offered by Republic bank.
You can put the 60 percent in treasury bills at an interest of around 24 percent and double your money in 3 yrs time
Am sure you are asking why you should do this, from my earlier submissions it is clear HFC’s stocks noticed an increase in its share price due to the speculative activities triggered by happenings in the bank as well as the offer being made by Republic bank.
This will definitely die down immediately the issues around the bank are resolved and this is likely to be done by the end of May after the bank’s AGM is held and the mandatory offer period from Republic bank ends.
This will push the bank’s share price back to a price of between 80 and 85 peswes which is in keeping with the bank’s performance.
That means your share price will now be at around 85 peswes as against the 1 cedi 60 peswes Republic bank is offering now.
Am sure you are wondering why am not really considering the bank’s performance in pushing the stock’s price up, based on the fact that Republic bank coming on board should have a significant impact on HFC’s performance, this is because we are only likely to see Republic’s bank’s full strength when it has controlling interest in HFC bank, and even at full strength increase performance will only come with time.
As it stands now, at 39 percent that is not good control to call the shots in the bank, it will need at least 51 percent to do that, then we can fill its impact.
And with shareholders still holding onto their shares this will not be possible.
Don’t also forget the bank’s performance apart from its internal issues will also be based on external factors including the country’s economic performance, the cedi’s performance among others which don’t look good now.
So shareholders are better off selling a part of the shares and invest in secure high interest rate T bills and keep part to benefit from the impact of Republic bank.
Long term investor
With a long term investor it should be the other way round.
But the success of their investment in the bank will also depend on whether Republic bank gets the controlling interest it is looking for.
If it does the performance of the bank is expected to improve by at least twice its current performance in 3-4 years time looking at its track record.
This in turn will translate in the bank’s stock on the GSE.
So a long term investor may choose to vary the plan slightly and do the 70-30 plan which is sell 30 percent and keep 70 percent.
So that if in the long term the bank performs well they can cash in with the 70 percent.
Movements of shares
Already some major individual shareholders of HFC bank have begun selling off their shares in the bank.
As at March this year at least four significant individual shareholders of the bank had sold some substantial amount of their shares in the bank.
HFC bank, made up of both institutional and individual shareholders have been in the spot light for months now.
According to the bank’s share structure Republic bank has 39.9 percent shares making it the biggest shareholder, SSNIT follows with 26.1 percent, Ghana Union Assurance 10.9 percent and Cocobod 5.6 percent.
Individual shareholders include Kwame Addo who has 6.8 percent stake in the bank, the outgoing MD of the bank Asare Akuffo also has shares in the bank and other board and former board members as well other individual investors with no ties to the bank have shares coming up to 10.7 percent.
As at March this year one of the bank’s board member and a non executive director Francis Koranteng had sold almost all of his shares in the bank.
As at December 2012 he had about 10,879 shares in the bank but now has 91 shares after selling 10,800 in previous months.
Another board member of the bank and a director of the bank Charles Ofori – Acquah who recently left the bank, as at last month had sold about 73 percent of his shares in the bank.
He held about 374,096 shares in the bank in March 2012 but as at March this year he held about 100,796 shares.
The bank’s former MD Stephanie Beata in 2013 acquired 400,00 shares in the bank in addition to previously held shares but sold 52percent of her total shares between January and February this year.
Meanwhile the bank’s outgoing MD Asare Akuffo as at last month had acquired additional shares in the bank after acquiring about 200,000 new shares.
While the bank’s former board chairman Nana Agyei Duku transferred all his shares to one Kwadwo K Duku who is believed to be his son.
At the end of the day however the final decision will also need to be driven by the short term or long term investor need for money now because if you need money immediately the answer is clear sell your shares and cash in on the good price rather than borrow funds at over 30 percent from a bank.
The beauty of this MTO process is that HFC investors will have to make the final decision and not any court or board or management.
That is a shareholder’s power at work.
By: Vivian Kai Lokko/citifmonline.com/Ghana