Periodically, we witness stocks on the NGX exhibit such jaw-dropping share price surges that leave you feeling like you’ve missed the train.
Some of these gains can be rationalized easily, often attributed to business fundamentals, potential mergers and acquisitions, shareholder maneuvers, or the classic tug-of-war between demand and supply.
But when a share price skyrockets by 1000%, it certainly raises eyebrows, leaving investors scrambling to decode the mystery.
Enter Juli Plc, a food and drug retail company that has rocketed to the top of the NGX’s best-performing stocks list for the first half of 2024, boasting an astronomical 1,508% gain. Juli Plc, a pharmaceutical company retailing food and drugs in Nigeria, has been quietly listed since July 1986.
To put this into perspective, the second best-performing stock posted a mere 150% gain, while the NGX All Share index climbed 33%.
The stock leaped from N0.59 at the year’s start to N9.49 by mid-year, with its market capitalization swelling from N118 million to N1.897 billion. The surge lasted for just 44 days and then it stopped and has remained relatively flat since then.
This astounding rise left many Nigerians baffled, as they had never heard of Juli Plc, let alone realized they missed out on a 1,508% return. But before you start lamenting your missed opportunity, let’s dive into how this stock achieved such a meteoric rise.
A quick review shows the ascent began in early February, with the stock averaging a 6% daily increase until about March 28, 2024. It peaked at N10.43 on April 2 before settling at N8.51 by the end of April, and has since plateaued.
The Nigerian stock market is notorious for its surprises, making it challenging to explain how a company with 199.9 million shares outstanding and a market cap of N200 million at the start of the year could surge to N1.89 billion in less than two months.
A deeper look reveals that during this period, daily trading volume averaged 223,000 shares, with a total of 9.8 million shares changing hands. Over the 44 days that saw a 1,508% gain, the stock appreciated by 10% on 25 occasions, dipping only three times – once in March and again on April 3, 4, and 8.
So, what’s the secret behind this 44-day sprint? In January, Juli Plc unveiled its 2023 interim results, showing a loss of N6.7 million, a significant improvement from the N11 million loss in the same period in 2022. By the time the audited accounts were published, the losses had shrunk to N75.7 million in 2023, compared to N208.4 million in 2022.
From all indications, fundamentals alone couldn’t have fueled this dramatic share price surge. A glance at the shareholdings showed no major shifts – Wema Bank still owns 30% of the company, Prince Julius Adelusi-Adeluyi holds 28.63%, and Midas Investment has 8.53%. This lineup has remained unchanged since 2023, into the first quarter of 2024, ruling out a change in shareholding structure as the cause.
There has also been no corporate actions such as share restructuring or cancellations or sharembuybacks, all factors that often impact share prices.
The only other plausible explanation is the whisper of potential acquisition talks, mergers, or capital injections on the horizon. However, we do not have any evidence or inkling that this is the case leaving analysts baffled.
But the NGX has seen this before – a stock suddenly surges, only for the hype to fizzle out. In stock market lingo, this phenomenon is known as a bull trap – a scenario where a stock experiences a bullish surge, luring speculators in, only for the price to stall or tumble, making it tough for existing shareholders to exit.
Juli Plc’s share price surge serves as a whimsical reminder that the NGX still has its fair share of wonders and retail investors are better off shielding themselves from such temporary gyrations. Retail Investors are better of focussing on the more reliable NGX 30 indexes where the most reliable and capitalized stocks can be found.
