Share split rumours fuel BRD stock increases

The shares of Banca RomA„sna pentru Dezvoltare (Romanian Development Bank-BRD) - Groupe SociA©tA© GA©nA©rale yesterday jumped almost 5% as compared to the previous trading session. According to capital market rumours, the bank is about to operate a new capital increase that will lead to granting free shares. Moreover, the market is rife with talk on a split of the face value of the bank's shares, which would greatly improve the stock's liquidity on the capital market. Such a split usually entails an increase in the share price.
Contacted by Ziarul Financiar, the BRD chairman Bogdan Baltazar replied "considering the very tight regulations of the National Securities Commission regarding the release of data that could influence the market, especially when it's about major players such as ourselves, it is too early to talk about the market rumours you quote."
According to capital market sources, the bank has some rather complicated operations in mind.
In the first stage, the capital will be increased by about 700 billion ROL - derived from asset reassessment and the foreign exchange gaps logged on September 30, 2002. The capital will be increased by granting free shares. In the second stage, to secure a fair split, one share with 5,000 ROL in face value will be divided into five shares with 1,000 ROL face value.
Then, the 700 billion ROL will be included in the bank's capital, which means that every shareholder that had five shares with face value of 1,000 ROL will receive another share for free.
The last stage will see the share's face value increase from 1,000 ROL to 3,000 ROL, as three shares worth 1,000 ROL each will merge into a single one worth 3,000 ROL.
The bank has already operated a capital increase this year, during which one new share was granted for every old share. The bank's capital currently amounts to 3,484.5 billion ROL. After the capital increase, the BRD market value posted a substantial increase. For instance, the price of one share has skyrocketed to 32,000 ROL, up from the face value of 5,000 ROL. After the increase, the price took a natural descent. However, if we add the free share, the market value is in fact much higher. Considering yesterday's closing price (29,300 ROL), the value of one BRD share has actually reached 58,600 ROL, up from 32,000 ROL, which accounts for an 83% increase.
The increase was triggered by the free share granting, but also by the bank's good results, joined by this year's spectacular evolution of the market.