Palace Amusement Company (1921) Limited’s board of directors will meet next Tuesday at its board meeting to consider the possibility of a stock split.

A stock split is where the number of shares is increased by a factor with the stock price decreasing by that factor. This is usually done when there is possibly a low supply of shares in the market, or the price has become ‘expensive’ to investors which might see reducing trading for that stock in which there is limited trading activity.

In the case of Palace Amusement, there are only 1,437,028 ordinary shares outstanding with the top 10 owning 1,280,924 shares or 89.14 per cent. This is the smallest number of shares for any listed security on the Jamaica Stock Exchange (JSE). Palace has been listed on the JSE since July 12, 1973 and has $1.44 million in issued share capital.

As a result of the relatively small free float and prior JSE minimum 100-unit rule, Palace peaked at $2,900 in November 2019 which made it the most expensive ordinary share at the time. While it has trended down since the COVID-19 pandemic, the frequency in trading has improved since only one unit is required to buy or sell a stock on the JSE. The news of the stock split sent Palace’s stock price up 30 per cent on Tuesday from $620 to $808.57, its biggest one-day increase in 2022. The stock halted up at open to $807.30 with only 22 units trading for the day valued at $17,788.54.

Palace’s annual general meeting (AGM) is scheduled to be held on January 24 at 2 pm by Cinema 1, Carib Theatre, 93A Slipe Road. If a stock split is proposed, it could possibly be added to the other three resolutions on the AGM notice. Mayberry Investments Limited is its ninth largest shareholder with a one per cent stake.

The consideration for Palace’s stock split comes at a time when Palace is attempting to attract moviegoers back to the theatres after two years of significant curfews, lockdowns and restrictions at its four movie theatres. It closed its New Kingston drive in on August 28 after opening the location in October 2020. It recently hosted a cinema day on September 10 which drew more than 7,000 patrons and outfitted its 16 screens in 2021 with hi-tech, Christie laser projectors for enhanced quality and viewing. First Heritage Co-operative Credit Union also hosted a movie day at some of Palace’s select locations.

Palace had laid off its entire staff base when COVID-19 hit and had to seek out external financing to maintain operations. It received a combined amount of $653 million in financing from Victoria Mutual Investments Limited (VMIL) in October 2021 which was used to provide working capital and repay a $262-million loan from the Bank of Nova Scotia Jamaica Limited. The first VMIL loan has a two-year moratorium on the principal along with the interest covered in the period also included. The $107-million loan will have a bullet payment on maturity.

The group received a one-year waiver letter from VMIL in June for breaching the minimum debt service coverage and total debt to tangible net worth ratios. The VMIL loans are secured by properties held by the group and have a tenure of five years.

While Palace’s consolidated revenue grew 210 per cent in the first quarter (July to September) to $249.71 million, it recorded a gross loss of $705,000 and an overall net loss attributable to shareholders of $56.51 million. This is in contrast to the $369.99 million in revenue generated for Q1 2019 and $20.01 million in net profit attributable to shareholders.

Palace’s Cineplex and Multiplex locations as segments were in the black or positive for the first quarter, while the Carib Cinema and Sunshine Palace locations recorded segment losses in excess of $10 million each. The group’s cash flow saw an outflow of $20.85 million for the quarter with cash and cash equivalents ending the period at $74.12 million. However, it welcomed more than 130,000 patrons during the quarter and 60,000 viewers in the month of July related to the Thor: Love & Thunder and Minions: The Rise of Gru films.

Palace’s total assets amounted to $1.73 billion including $1.07 billion in property, plant and equipment. Total liabilities was $1.40 billion with working capital (current assets minus current liabilities) coming in at negative $96.51 million. Equity attributable to shareholders stood at $326.80 million with the accumulated deficit totalling $467.68 million.

“Even as the group continues to experience positive crowd response and a move towards recovery, it continues to take steps to control costs and manage cash flows balanced with maintaining operational efficiency in all our cinemas. Our goal to ensure that our audience enjoys the ultimate movie experience is still high on our agenda and re-engaging them is our priority; hence, our recent listing as a merchant on the GiftMe platform is aimed at meeting that objective while improving accessibility and market reach,” Palace’s first quarter report stated.

There have been two stock splits on the JSE in 2022 which involved Massy Holdings Limited and FosRich Company Limited. Massy Holdings cross listed on the JSE at an astonishing $2,463.08 on January 26 before splitting 20 to 1 from $1,952.58 to $97.63 on March 10. FosRich split 10 to 1 on July 25 from $33.56 to $3.36 per share which also moved its issued ordinary shares from 502,275,555 to 5,022,755,550 shares. Both Massy and FosRich have seen a significant increase in their shareholder base following their stock splits.

Palace is owned by Charles “Douglas” Graham through Russgram Investments Limited which owns 65.9 per cent and his own 7.7 per cent direct stake. Graham has been the managing director of Palace for the last 60 years and has been in his family’s control since 1962 when his father Russel Graham acquired the business.