Aradel Holdings Plc, Nigeria’s newest entrant to the Nigerian Exchange (NGX), has faced a significant wave of sell pressure from investors, leading to a sharp 31 per cent drop in its stock price over three days.
This decline has resulted in a staggering N845bn loss in market value, bringing the company’s capitalization down from N3.562trn to N2.717trn, contributing to a broader sell-off in the domestic market.
The decline highlights early volatility surrounding Aradel Holdings, an integrated energy company, which had listed 4.34 billion shares on the NGX Main Board via a “Listing by Introduction” on October 14, 2024.
Initially priced at N702.69 per share, the listing significantly boosted NGX’s market capitalization by N3.05tn and marked a notable milestone in the oil and gas sector’s participation in Nigeria’s stock market.
In the first two days of trading, Aradel Holdings enjoyed an initial surge in its stock price. Shares climbed 10 per cent on Monday, pushing its market capitalization to N3.36trn, followed by another six per cent gain on Tuesday, bringing its value to N3.56trn.
However, investor sentiment quickly shifted by Wednesday, triggering widespread selling, particularly from those who had acquired shares when the company was listed on the NASD-OTC market.
On Wednesday, the stock price fell sharply, dropping from N820 to N720 per share. The downward trend continued on Thursday, with a maximum 10 per cent decline, closing the day at N694.80 per share.
By Friday, the sell-off accelerated, and the stock shed another 9.99 per cent, closing the week at N625.40 per share, reducing Aradel’s market capitalization to N2.717trn.
This sharp drop in value has raised concerns among investors and analysts alike, as it reflects the cautious sentiment surrounding the company’s debut on the NGX.
Analysts attribute the sell pressure to profit-taking by early investors, particularly those who held shares from the company’s listing on the OTC market.
According to Ambrose Omorodion, Chief Operating Officer of Investdata Consulting Limited, the stock’s recent correction was partly expected due to the share split, which provided shareholders with additional shares, enabling them to realize profits.
“At the new price level, many shareholders are taking profits. Additionally, it seems the stock may have been overpriced by the market or management, having been listed at N702.
“Investors that held shares during the OTC market phase are now selling to lock in gains,” Omorodion noted.
Despite the sharp sell-off, Omorodion emphasized that the company’s fundamentals remain strong.
He pointed to Aradel’s solid corporate governance and its positive outlook in the energy sector. Investors are also anticipating the company’s third-quarter results, with a potential interim dividend on the horizon, depending on management’s decisions.
While the volatility has raised concerns, analysts suggest that investors should closely monitor broader market conditions and Aradel’s performance in the coming months. The company’s strong fundamentals remain a positive factor, but caution is advised amid the prevailing market risks.