Palace weighs stock split
Cinema operator Palace Amusement Company is contemplating a stock split, an issue to be debated first by the board of directors on December 20.
If the board approves, the company, which is majority owned by Charles ‘Douglas’ Graham and family, would then seek approval from its shareholders to proceed with the split.
Palace is one of the most illiquid stocks on the Jamaica Stock Exchange, with only 1.437028 million shares in issue. Comparatively, the listed shares of all other companies on the market number in the tens of millions, up to 12.5 billion units. The closest to Palace is renewable energy investor MPC Caribbean Clean Energy, with 21.66 million shares trading on both the JMD and USD platforms.
Although the cinema stock trades frequently, it typically does so in tiny volumes that often range between one and five shares. Its daily volumes over the past year have ranged from one to 820 units, while its price has ranged from $620 to $1,150 within the period.
The stock, which trades under the ticker symbol PAL, dropped to a five-year low at $620 per share on Monday, but rallied by over 30 per cent on news of the stock-split consideration to $808.57 on Tuesday, on trading volumes of 22 shares.
The rise in Palace stock to unprecedented levels began in 2017, when the price began to climb exponentially on what was then said to be market anticipation regarding pending popular movie releases. The share price tripled to the $500 to $600 range in 2017 and continued the northward climb to $2,900 in December 2019.
It began to dip the following year, in line with the bear market that emerged under the coronavirus pandemic.
Despite the dramatic pullback, Palace remains the most expensive stock on the market, rivalled only by cross-listed Guardian Holdings Limited, which traded at nearly $542 per share on Tuesday, but has risen as high as $650 in the past year.
Chairman Douglas Graham, his wife and board member Melanie Graham, and connected companies hold at least 75 per cent of the cinema company, so a decision at the shareholder level on whether the stock split will proceed largely rests with the couple.
Palace, which operates Carib 5, Palace Cineplex and other theatres, is currently worth $1.16 billion on the market. A stock split would not affect its market capitalisation, but would create new shares for trading.
In its fiscal year ending June 2018, Palace broke through to $1 billion of revenue for the first time, after the promise of the newly released Black Panther movie performed to expectations. That same year it also set a historic record of $137 million in net profit, $124 million of which was attributable to shareholders.
All its gains, however, have been erased by the pandemic, and the company has been struggling to get back on its feet. A new drive-in theatre that was supposed to regenerate business was recently locked down, having failed to live up to expectations.
Palace is still trying to recover lost business and unravel its losses, with limited success so far. Revenue grew sixfold, from $106 million to $650 million at year ending June 2022, but it wasn’t enough to pull the cinema operator out of the red. Its annual losses amounted to $260 million despite the improvements.
During the pandemic, when cinema traffic dried up, the business was kept afloat by injections of debt, which saw its borrowings spiking from $55 million as the health crisis was taking hold to $711 million presently.
As of September – a quarter in which sales revenue continued to grow but its bottom line remained stubbornly red – Palace’s net worth, or book value, continued to erode to $326 million, which is just about half the level of a year ago.