Gobi JSC targets greater liquidity in stock split
At the conclusion of its annual shareholder meeting held on October 3, 99.99 percent of Gobi JSC shareholders voted to enact a stock split of 100-for1. This means that if a shareholder owned one share previously, they will now own 100 shares in the company.
The price of one share in Gobi JSC was 31,700 MNT before Wednesday and since the stock split, one share will be worth 317 MNT. Shareholders in the cashmere producer likely supported a stock split due to the fact that the stock price of one share had climbed too high. This made selling and buying of shares difficult as prices were too high for investors to acquire a standard board lot of 100 shares.
Board lots are a standardized number of shares defined by a stock exchange as a trading unit. In most cases, this means 100 shares. The board lot is designed to prevent "odd lots" and to facilitate easier trading. For example, it is more difficult to find a buyer for 67 shares than it is for a broker to find a buyer for 100 shares, the standard board lot.
In addition, a stock split can help improve liquidity and make secondary market trading more efficient. A higher number of shares tends to result in better liquidity and helps to facilitate trading, whether it be on a large or small scale. Good liquidity for a share is usually something that investors take into account as it signifies the amount of flexibility in buying and selling the shares without a large increase or drop in prices.
With the decision, Gobi JSC increases its number of shares to 780.1 million shares from the previous 7.8 million shares. The company’s market capitalization currently is 250 billion MNT. The biggest four shareholders in Gobi JSC include Hide Inter LLC, which owns 34 percent, FCI LLC who owns 28.59 percent, Tavan Bogd Trade LLC who owns 21.64 percent. The remaining 15 percent of the company is owned by 17,000 to 18,000 minority shareholders.