The share price of Transnational Corporation (TRANSCORP) has experienced significant volatility in recent weeks, but the past two days have seen a more pronounced rally with the security gaining 10% each day. Additionally, there seems to be limited liquidity in the security, with very little visible supply in the market.
TRANSCORP’s share price began to rise in early April as investors responded positively to strong full-year 2022 earnings. However, trading activity led to volatility as investors took profits and positioned themselves for the company’s upcoming dividend of ₦0.05, with the qualification date on April 11, 2023.
The recent surge in price and increased volatility is due to reports that Nigerian entrepreneur and billionaire, Femi Otedola, has acquired a 5.52% stake in TRANSCORP, making him the company’s majority shareholder.
However, the company has not confirmed this news, as they must receive official notification from the Registrar indicating that an investor has achieved a 5% shareholding. We expect official confirmation within the next few days.
What does this mean for Shareholders of TRANSCORP?
- Long-term holders of TRANSCORP shares need not be overly concerned about the current volatility, as market forces will eventually determine the security’s equilibrium price.
- However, investors who hold TRANSCORP shares as part of an active trading portfolio should carefully consider their current returns and portfolio objectives in the coming days to determine if it is advantageous to sell their position and realize a profit.
- For those considering entering or buying TRANSCORP shares, it is worth noting that a pullback is expected following the recent rally driven by the battle for majority shareholding. This is particularly likely, given TRANSCORP’s Q1-2023 performance, which was weaker than the same period in 2022.
- The resolution of the shareholding tussle is expected to occur during the company’s 15th Annual General Meeting scheduled for April 26, 2023. As such, potential buyers may wish to wait until after this date to assess the impact of any outcomes from the meeting on TRANSCORP’s share price
TRANSCORP’s price at the start of the year was ₦1.13, the current price is ₦2.03 with a year-to-date return of 79.6%.
Our View
We advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.
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