Storm Over Sterling As Experts Query Share Reconstruction, Warn of Potential Shareholder Value Erosion

Stakeholders in the nation’s capital market have queried the Sterling Financial Holdings Company Plc’s share reconstruction exercise, which is on a 10 for 1 basis as they fear values may be eroded in this process, if not well managed.

Share reconstruction, sometimes referred to as share consolidation, does not alter the total value of an investor’s holdings immediately after implementation.

On his part, the  founder of Okwudili Ijezie & Co. (Chartered Accountants), Chief Blakey Okwudili Ijezie said, the reconstruction raises concerns about long-term shareholder value..

“Any day I hear a company is reconstructing shares, I become cautious. The share price may initially rise after reconstruction, but it will eventually return to where performance justifies it, ” he pointed out.

Ijezie argued that, reducing the number of shares does not automatically create value for investors. “If the financial performance does not improve significantly, the market will eventually adjust the price accordingly, ” he stressed.

He added that, investors with large holdings would see their share counts reduced substantially while relying on market performance to preserve value.

Similarly, pioneer Registrar of the Institute of Capital Market Registrars (ICMR), Dr. David Walker Ogogo said,  boards typically evaluate numerous strategic considerations before approving such major corporate actions.

‘For any board to come up with such a decision, they must have looked at the pros and cons thoroughly, ‘  he noted.  He suggested the reconstruction may be tied to broader strategic objectives that are not yet fully disclosed to shareholders.  To him, “it may not look attractive from the outside, but the board may be considering factors that investors are not privy to.”

While Ogogo acknowledged that the move may not immediately align with shareholder interests, he added that, “It is definitely against the immediate interests of shareholders because shareholders naturally want returns as quickly as possible.”

However, he cautioned investors against panic selling, emphasizing that experienced boards generally act with long-term institutional objectives in mind.

Another expert, Dr. Ebo Ayodeji also observed that previous reconstruction exercises have often been followed by short-term price declines In most cases, there is usually a pullback after reconstruction, he said.

He explained that, reducing shares outstanding may improve per-share metrics and help stabilize volatility over time. To him, ‘ehat eventually drives the stock higher is not the reconstruction itself but strong financial performance and improved dividends. ‘

Recall that, this move, approved by shareholders at the firn’s 3rd Annual General Meeting(AGM) held on June 9, 2026, will see Sterling reduce its issued shares from 68.5 billion units to 6.85 billion units through a share reconstruction exercise, subject to regulatory approvals and confirmation by the Federal High Court.

Experts believe the reconstruction represents one of the most significant capital structure adjustments by a Nigerian banking group in recent years.

The development comes at such a time when Sterling is simultaneously seeking approval to raise up to $400 million through various debt and equity instruments, prompting questions about the timing and broader implications of the exercise.

Leveraging on precedence, market history suggests that post-reconstruction share prices often struggle to sustain the higher valuation levels.

Analysts say the success of such exercises depends largely on earnings growth, dividend capacity, and investor confidence rather than the reconstruction itself.