Proper pricing of securities | B3

The stock value should not be so high as to make the minimum trading lot too expensive, or too low to the point that the smallest price fluctuations represent significant percentage changes. Due to stock splits and reverse splits, it is possible to keep the stock trading price within a range that is accessible for any investor profile and, at the same time, avoid merely speculative transactions.

  • Stock splits

    When a company’s stock price reaches a value considered high, it may choose to split it into two or more shares. Thus, it adjusts the price of its stock to a level that is accessible to investors with different profiles. With the split, the company increases the number of shares, but keeps the share capital unchanged. The shareholder then holds more shares at a lower price, while maintaining the financial value invested.

    Benefits of stock splits and reverse stock splits:

    • Increased liquidity;
    • Attractive quotation - maintenance of stock price on the market at an attractive level for trading.

    Regulatory steps to make a stock split

    Call notice of EGM and management proposal

    Issue a call notice of the EGM and management proposal fifteen (15) days before holding the EGM containing the following information:

    • Split factor;
    • Shareholding position date considered for the split;
    • Date for share credit.

    Holding the EGM

    • The meeting deliberates the stock split under the conditions described in the call notice and the management proposal;
    • The company should release the contents* of deliberations or the meeting’s minutes

    * If the company chooses to release contents of deliberations on the date that it holds the EGM, it has to release the minutes up to seven days later.

    Split Shares

    • The split stock is now traded;
    • The split shares are credited to the shareholders four days after the holding of the EGM.
  • Reverse stock splits

    When a company wishes to decrease the amount of shares in circulation and increase its value per share, reverse stock splits (or inplit) are a possible option. With the reverse split, there is no change in the capital and it does not change the financial value of the company’s sahres already owned by the investor.

    Benefits of reverse stock splits:

    • Decreased volatility of paper;
    • Eligibility to the Ibovespa Index and other B3 indexes – penny stocks are not eligible;
    • Facilitation of the business flow – with less abrupt fluctuations, stocks are not constantly auctioned.

    Treatment of fractions generated by the reverse split

    Regardless of the reverse split factor established, some investors will have their participation reduced to share fractions. Therefore, so that the reverse stock split does not result in elimination of minority shareholders (pursuant to CVM Instruction No. 323, January 19, 2000), it is required to ensure that they continue to integrate the stock frame with at least one new unit of capital, since they manifest this intention within the time limit laid down in the general meeting.

    Options to treat the fractioning are:

    • Shares donation by the controller
      • The controlling shareholder may choose to donate shares in order to complete the participation of the minority shareholders owning fractions in integers, regardless of the number of shares they owned before the reverse split. In this case, shares will trade in reverse split right after the day of the corporate decision approving the reverse split.
    • Sale of fractional shares in round lot
      • If shares donation by the controller is impractical, there is another alternative: agglutination of fractions in round lot, selling this lot up for auction on the stock exchange and later proportional value credit to the holders of these fractions.
      • For that, prior to the auction for the sale of fractions, the company should give to shareholders a minimum of 30 days and a maximum of 45 days so that they freely recompose in the market the lots that are multiples of the reverse split.
      • Fractions remaining at the end of the period of composition will be agglutinated in whole lots and sold on the stock exchange by the company, with the assistance of an intermediary authorized to negotiate on the B3. Proceeds from the sale will be prorated proportionately among the holders of fractions.