Icon announces plans for share split to improve stock liquidity

Clinical trials group Icon has announced plans for a two-for-one share split. The Irish group, which operates largely out of the United States, says the move is intended to improve marketability of the stock.

Icon shares have strongly outperformed the market and their peers in the year to date, increasing in value by around 50 per cent. The stock, which trades mostly on the US Nasdaq index, hit $70 (€54.5) yesterday following the announcement before retreating towards its overnight level of around $68.70.

Analysts in both Dublin and the US welcomed the news, which had been expected for some time. Companies tend to split stock when the unit price gets too high and the current level is seen as potentially off-putting, especially to smaller retail investors.

While Icon trades on roughly the same price/earnings ratio as its peer group, it has fewer shares in circulation. "This exercise will bring the shares back down to peer levels, which could be good for cosmetic reasons," said Goodbody analyst Dr Ian Hunter.

Davy's Jack Gorman noted that companies often see share prices rising after stock splits on consumer perception that, at the lower face price, they are now better value.

"Icon has been one of the really good stories of the year and this is perfect timing, coming just after very strong results," said Mr Gorman.

The company last month reported a 56 per cent rise in quarterly profits and, more significantly, the return to profit of its Central Lab unit for the first time in 14 quarters. "It has been a very good recovery for the business in what is currently a buoyant sector," said Dr Hunter.

The proposal is formally presented as a one-for-one "bonus share" issue as, according to the company sources, the concept of a "stock split" does not appear in Irish company law. The end result, however, is identical.

The proposal is subject to approval at an extraordinary general meeting in Dublin next month, which should also confirm the company's decision to change its fiscal year. At present, Icon's financial year ends in May. The company is bringing that in line with the calendar year.