Shares of the chemical company Sniace will return to trading on the Spanish stock exchange in the coming weeks. While there is no fixed date yet for its shares to resume trading on the Madrid exchange, forecasts suggest it will be in around two or three weeks . The Cantabrian company has already begun the process of lifting the suspension of its stock market listings.
It should be recalled that in September 2013, the Spanish National Securities Market Commission (CNMV) decided to provisionally suspend trading of its shares . This followed the company's decision to file for voluntary insolvency proceedings , due to its inability to reach an agreement to pay its debts or secure financial support for its business project.
Now that the request to lift the suspension is accepted by the national regulatory body, its shares will return to trading on the stock exchange. It's worth noting that they closed at €0,196 per share , practically at an all-time low, after having reached a high of €6,39 in previous years.
As a result of its performance in the financial markets, knowing the purchase price will be crucial . This is because, depending on this variable, you can apply different strategies when it returns to the stock market to achieve a better return on your savings.
At what prices did you buy the shares?
In any case, there will be different situations for those retail investors who bought their shares at €3, or conversely, those who finalized their transactions weeks before the suspension, at around €0,20 or €0,30. If you fall into the first group, you will be among those who have the greatest difficulty recovering all (or part) of your savings . This is because, with the closing prices, you will have losses of around 90%.
If you were one of the last-minute buyers, you'll likely approach the stock's arrival on the market with more anxiety. And you'll be more inclined to resolve the issue in the short or medium term, provided the stock price responds positively to the implementation of this measure. After all, you'll be only 10% or 20% away from achieving your goals , which are simply to close your positions without losses, and with a bit of luck, even with a profit.
Another aspect that you will necessarily have to take into account to optimize your investment, is that once its shares are listed on the Spanish continuous market, the company has planned to carry out a capital increase , by which new shares will be put into circulation, in the proportion of two new shares for each old one, at ten euro cents of nominal value each, with preferential subscription rights of the company's shareholders.
But how will this corporate move affect your share price? Essentially, it will have a dilutive effect, causing your shares to trade below their closing price before the suspension . This is because with more shares outstanding, the price will decrease proportionally.
Therefore, it is expected – and considering the results of other capital increases carried out by companies listed on equities – that losses will be the common denominator of the new scenario it will present upon reintegration into the financial markets.
When the shares are not listed ...
This unusual situation has meant that you've been unable to do anything with your shares for over two years. The reason is quite simple: without being able to trade your shares, you find yourself in a completely defenseless position —a common characteristic of stocks that have experienced this economic shift—and one that has affected more than one listed company in recent years, including Pescanova, CampofrÃo, and La Seda de Barcelona.
A very complex process where the only thing you can do is wait, with a little patience, until it is finally resolved. In some cases, in a positive way, re-listing, as in this specific case; but in others by liquidating the company, and as a consequence of it, losing all the savings invested from the beginning.
What can you do in these situations? Of course, it prevents you from selling them on the market , and the only option is a private share purchase process, which is also very complex and will present many difficulties. You'll need a notarized deed to validate the transaction, which will incur the costs associated with this professional service, significantly increasing the overall cost of your operation.
On the other hand, banks will charge you a custody fee, albeit a very small one, for managing the securities . Yes, you read that right, even though they have no intrinsic value because they aren't publicly traded. In short, more additional expenses, even though you can't actually manage the ownership of this financial asset.
Companies with little capitalization and liquidity
If you review the history of all the companies whose shares have been suspended from trading, you'll reach a very clear conclusion. They belong to small business groups with serious financing problems , and their shares offer minimal liquidity in the markets.
They are also characterized by their high volatility, with significant price fluctuations within a single trading session , sometimes reaching up to 30%. Most are penny stocks, speculative securities that delight aggressive investors seeking to become millionaires in a matter of days, only to find their wealth has dwindled considerably at the end of the process, with the real possibility of losing virtually everything.
A large majority of financial analysts recommend avoiding these stocks under any circumstances. The further away, the better, is their advice. Not only because their price fluctuations are extremely high, but also because experience shows they are likely to reach this unpleasant situation: a trading suspension. With all the drawbacks outlined in this article.
Furthermore, their low market capitalization means you'll have more than a few problems selling them at market price , since demand for their shares is lower than supply. This is especially true when dealing with large blocks of shares due to their high monetary value.
Given the current situation with these stocks, the best course of action is to refrain from trading them . The national continuous market offers a wide range of options, so you shouldn't limit yourself to just these shares, where gains can be quite attractive, but losses can be no less severe. Another characteristic of these stocks is that they don't distribute dividends to their shareholders, as they are companies with serious financial problems that are not generating any profit in their business results.
What will happen when it goes back to trading?
In equities, there are no absolute certainties, and it is the markets themselves that dictate share prices. There's little you can do about this stock market reality. Nevertheless, there are some indicators that can help you predict how they will behave in the coming trading sessions. Certainly, don't expect significant price increases, at least not during the first few weeks of trading . On the contrary, the effect could be the opposite, as a consequence of the chemical company's planned capital increase.
Can you take a position in the stock? If you want to buy shares for the first time, you'll have the opportunity to invest at very low prices, and therefore the risks will be significantly lower. However, until the effects of the capital increase have subsided, it's not advisable to get involved in any trading.
Although its prices are undervalued, any drop in its value could represent a significant loss . If it were to fall to €0,10 from its current price, it would imply a decrease of no less than 50%.
Six tips to improve your position in value
The resumption of trading is undoubtedly good news for you if you've been invested in these shares for exactly two years. However, it's wise to be cautious and take some precautions to try and recoup at least some of your investment. By following a few simple recommendations, you can maximize the benefits of this company's stock returning to the market.
- Its return to the stock market will not mean significant revaluations in its price, not much less, with respect to the last closing (2013) since its business accounts are seriously compromised through its debts.
- You will have to take advantage of any bullish movement in the first days of trading to sell them at market price, especially if you are in need of liquidity to meet your main family expenses.
- Under no circumstances should you look at the prices at which it was quoted some years ago, as it will probably never reach them, at least in the short and long term.
- You can take advantage of their situation to develop handicapped sales to lower your bill for the next fiscal year, and in this way, save a few euros in the income statement.
- It will be very timely that you formalize the sale of the shares to divert their amount towards other companies that currently have higher appreciation expectations in their prices. In order to reduce the losses generated by this value in the Spanish stock market.
- In case you do not need the money, and if the investment is not very large, you can wait to see how their prices evolve in the coming months. In case the restructuring of the company served as a clear pretext for prices to take an upward momentum in the long term.