Category: Investors

Retail investors have opted for the use of special purpose vehicles (SPVs) to aggregate funds and buy into the ongoing initial public offering (IPO) by Airtel Africa Plc.

Airtel Africa Plc is raising up to N325.25 billion in a combined global and Nigerian IPOs. Airtel Africa, the parent company of Airtel Networks Limited, Nigeria’s second largest telecommunication company, plans to list its shares on the London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE).

Airtel Africa, a subsidiary of India’s Bharti Airtel Limited, is offering between 501.13 million ordinary shares of $1 each and  716.41 million ordinary shares of $1 each at indicative price range of between N363 per share and N454 per share.

The IPO, being undertaken through a book building, is, however, restricted to qualified institutional investors and high net worth investors (HNIs).  Under the rules in Nigeria, a high networth investor is defined as an individual with net worth of at least N300 million excluding automobiles, homes and furniture. This implies that only individuals and institutions with a minimum assessable investment of N300 million can participate directly in the IPO.

The IPO, which opened on June 18, 2019, is scheduled to close on Thursday June 27. The announcement of offer price, offer size, publication of the pricing statement and allotment of ordinary shares will hold on June 28, 2019. The allotment of ordinary shares and crediting of ordinary shares to the Central Securities Clearing System (CSCS) accounts of successful subscribers will take place on June 29 and   July 3.

Airtel Africa is scheduled to be admitted to the official list and begin trading on the NSE on July 4. Already authorities at the NSE and Securities and Exchange Commission (SEC) have approved the listing of the resultant shares.

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Checks indicated that investment houses have created SPVs which are aggregating subscriptions from retail investors. While the arrangements differ slightly, the investment firms appear to be using the same template for the SPVs, suggesting a sort of industry consensus on the approach to bypass the high net worth restriction.

Under the arrangements, the SPV will aggregate demand from retail investors and use its net worth to subscribe to the shares on behalf of the retail investors. Once successful and its account credited with the IPO shares, the investment firm will cross the shares into the CSCS accounts of the retail investors at the commencement of trading on the NSE.

The minimum share subscription by most SPV is 500 ordinary shares while the price is fixed at the ceiling of N454 per share, implying a minimum subscription of N227,000. Under the terms, the in-house allocation may be done on a pro-rata basis in the event of under allotment of the full subscription while the retail investors will bear all transfer charges. However, in the event that the clearing price is lower than N454, the excess amount will be refunded to the investors.

Experts who spoke on the SPVs said there was nothing legally wrong with the use of SPV to bypass the high net worth restriction, noting that the SPV is similar to collective investment by all the retail investors.

Nigerian market has substantial retail investors. Latest data from the NSE indicated that domestic retail investors accounted for 42 per cent of total domestic transactions at the Nigerian equities market. The five-month report ended May 31, 2019 showed retail investors led the market in two months.

SPVs are using attractive dividend policy to woo retail investors, who characteristically are usually excited by dividend-paying companies. Airtel Africa aims to distribute a minimum of 80 per cent of its consolidated free cash flow to its shareholders as cash dividend, subject to a ratio of net debt to underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between two times to 2.5 times being maintained. Dividend distribution is also subject to all regulatory, statutory and monetary restrictions.

The net proceeds from the IPO will be used to offset the company’s debt. The board of Airtel Africa said the IPO and the listing on the NSE would encourage operational discipline through the establishment of an independent capital structure and governance framework following the successful turnaround of the group’s operations.

According to the company, the IPO and listing would facilitate measurement of the group’s continued positive performance against holistic, publicly disclosed metrics as it enters a strong free cash flow phase.

The company is also expected to enter an optimal capital structure and enable improved leverage for greater flexibility in pursuing growth opportunities going forward while also having access to the capital markets and diversification of its capital base to support continued growth.

While the Nigerian offer shall be issued in Naira, Airtel Africa has avowed that the rights attaching to the shares allotted under the Nigerian offer shall be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the company.

According to the company, on a show of hands every holder of ordinary shares in the capital of the company who is present in person shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote per ordinary share.

Airtel Africa added that except as provided by the rights and restrictions attached to any class of shares, shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

“There are no restrictions on the free transferability of the Nigerian offer shares,” Airtel Africa stated, adding that no expenses will be charged by the company to any investor who purchases the Nigerian offer shares.

In its prospectus, Airtel Africa however cautioned that shareholders may be subject to exchange rate risk.  According to the company, the investment by Nigerians may be subject to exchange rate risks.

“The ordinary shares are, and any dividends to be paid in respect of them will be, denominated in United States (US) dollars however the currency of issue is United Kingdom Pounds Sterling, for the Global Offer, and is naira, for the Nigerian Offer. An investment in the ordinary shares, by an investor whose principal currency is not US dollars, such as Nigerians, is exposed to foreign currency exchange rate risk. Thus, fluctuations in the exchange rate between Pounds Sterling and naira could materially and adversely affect the prices of the ordinary shares listed on the NSE. Any depreciation of US dollars in relation to the Naira currency will reduce the value of the investment in the ordinary shares or any dividends in foreign currency terms,” the company stated.

The International Organsation of Securities Commissions (IOSCO) has published a report that examined the factors affecting liquidity in secondary corporate bond markets under stressed conditions.

IOSCO is global body of securities regulators and its members regulate more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a member of both the board of IOSCO.

The report, prepared by IOSCO´s Committee on Emerging Risks, examined how liquidity in secondary corporate bond markets tends to evolve when those markets experience stress.

The report seeks to increase understanding of how stressed conditions may affect both bond and other financial markets and the financial system more broadly.

The board of IOSCO stated that the findings were drawn from a review of the literature on liquidity in corporate bond markets under normal and stressed conditions, an examination of past episodes of stress in corporate bond markets and discussions with a broad range of industry stakeholders.

The report noted that changes in the structure of secondary corporate bond markets have altered the way that liquidity is provided in these markets.

According to the report, these changes result from such things as post crisis regulations that have reduced the capacity of intermediaries to provide liquidity in secondary corporate bond markets; greater risk aversion on the part of intermediaries; the gradual introduction of electronic trading; and significant growth in the size of these markets resulting from central banks’ quantitative easing policies and low rates of return on other financial assets.

The report highlighted that the structure of corporate bond markets has evolved since the financial crisis, driven primarily by changes in the behavior of market intermediaries and in the supply of and demand for corporate bonds.

The report also discovered that a reduction in the capacity and desire of dealers to participate in corporate bond markets as principals could mean that future movements in bond prices in times of stress will be more acute than before.

According to the report, several characteristics of corporate bond markets should reduce the risk that strong price movements in bond markets will generate broader economic stress. These include effective liquidity management by issuers of corporate debt, reduced leverage and fewer leveraged players in the market than before the financial crisis, and the low frequency with which many corporations enter primary bond markets for financing.

The report submitted that the willingness, resources and ability of market participants to provide sufficient demand-side liquidity to help stabilize markets will be critical factors in determining how corporate bond markets operate under stress.

IOSCO reported that mutual funds are unlikely to be a source of either considerable selling or price volatility under stress, particularly those funds with managers who have instituted strong liquidity management processes, including plans for operating under stressed conditions.

The Institute of Directors (IoD) Nigeria has launched an  investigation into the crisis between the Securities and Exchange Commission (SEC) and Oando Plc.

It has mandated its directors of Development and the Ethics committees to review the crisis between the apex capital market regulator and the quoted indigenous oil and gas company.

According to IoD Nigeria, its interest is borne out of its commitment to entrenching good corporate governance in Nigeria.

In a statement signed by its Director General, Mr Bamidele Alimi, IoD Nigeria stated that the committees “would make appropriate recommendations for the consideration of the Governing Council of the Institute”.

“As the professional body for Directors in Nigeria, IoD Nigeria has taken a very keen interest in the developments and is monitoring the outcomes of all the actions initiated by all the parties concerned. There is no doubt that these developments have created huge lessons for all corporate Directors as well as SEC regardless of whatever their eventual outcome may be,” IoD Nigeria stated.

SEC had on May 31 released a statement indicting the management and board of Oando of sundry corporate governance abuses and infractions of relevant capital market laws.

SEC barred the Group Chief Executive Officer (GCEO) and the Deputy Group Chief Executive Officer (DGCEO) of Oando from being directors of public companies for a period of five years. SEC also ordered certain members of the board of directors of Oando to resign.

The apex capital market regulator stated that it had concluded investigation into alleged corporate governance abuses at Oando and found that the company was guilty of serious infractions and market abuses.

SEC also directed the payment of monetary penalties by the company and affected individuals and directors, and refund of improperly disbursed remuneration by the affected board members to the company.

SEC also directed the convening of an Extra-Ordinary General Meeting on or before July 1 to appoint new directors.

These, among others, the SEC stated, were part of measures to address identified violations in the company.

According to the SEC, following the receipt of two petitions by the Commission in 2017, investigations were conducted into the activities of Oando. Certain infractions of relevant laws were observed. The Commission further engaged Deloitte & Touche to conduct a forensic audit of the activities of Oando.

On June 2, SEC appointed an interim management team headed by Mr. Mutiu Sunmonu, a former Managing Director of Shell, to oversee the affairs of Oando and to conduct an extra ordinary general meeting on or before July 1 to appoint new directors to the board of the company, who would subsequently select a management team for Oando.

Oando, however, described the directives from the SEC as attempts to prejudice the business of the company.

The company stated that the alleged infractions and penalties were unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the company.

According to the company, it has not been given the opportunity to see, review and respond to the forensic audit report and so unable to ascertain what findings were made in relation to the alleged infractions and defend itself accordingly before the SEC.

A Federal High Court of Lagos under presiding Judge C. M. A. Olatoregun on Monday, June 3, granted Oando’s GCE, Adewale Tinubu, and DGCE, Omamofe Boyo, an injunction restraining SEC from taking any step concerning its decisions indicting the board and management of Oando of sundry corporate governance malpractices and market abuses.

The court also restrained Mutiu Sunmonu, who was appointed by SEC, from acting as the head of the interim management of Oando. The court ordered a stay or suspension of the enforcement of the execution of the SEC’s decisions as contained in its letter dated May 31.

The injunction directed all parties involved to maintain the status quo pending the determination of the motion on notice. The case was adjourned till June 13, 2019 and on the adjourned date, subsequently adjourned to June 24, 2019.

However, Oando on Friday, June 7 announced that two non-executive directors, Chief Sena Anthony and Mr. Oghogho Akpata, had resigned from the board of directors with effect from June 3. A source at Oando said the non-executive directors were frustrated and intimidated by the antics of SEC. Oando described Anthony and Akpata as active members of the board and its subcommittees.

On Monday June 10 ordered the suspension of Oando’s Annual General Meeting (AGM), which had been scheduled for Tuesday, June 11 in Lagos. SEC stated that the suspension was based on the ex-parte order of the Federal High Court, Ikoyi, Lagos, which ordered status quo to remain.

SEC stated that it suspended the AGM until further notice to allow the parties maintain status quo adding that it would update relevant stakeholders and the public on the outcome of the ongoing litigation.

Oando disagreed with SEC’s position, pointing out that it had by notice to the public and its shareholders on May 10 validly convened its 42nd AGM. In its response to the suspension filed at the NSE, Oando stated that the cancellation of the scheduled AGM by SEC was not in the best interests of the company and its shareholders who had travelled at great expense, from far and wide, to attend the event.

“The company also stands to lose significant shareholder funds by the attendant cancellation of the AGM at such short notice,” Oando stated.

Ellah Lakes Plc has listed 1.88 billion ordinary shares of 50 kobo each issued to shareholders of Telluria Limited as consideration for 100 per cent acquisition of Telluria.

Ellah Lakes, one of Nigeria’s foremost agriculture businesses with specialty in fish farming, acquired Telluria to diversify its product offerings in the agribusiness sector. Ellah Lakes was incorporated on July 2, 1980 and was listed on the NSE on January 14, 1993.

The new shares were listed on the Nigerian Stock Exchange (NSE), bringing the new shares at par with the old shares of Ellah Lakes. With the listing on Monday, the total issued and fully paid up shares of Ellah Lakes increased from 120 million ordinary shares of 50 kobo each to 2.0 billion ordinary shares of 50 kobo each.

Ellah Lakes had acquired 100 per cent equity stake in Telluria with effect from May 7. Having complied with the necessary regulatory requirements, the acquisition was approved by the NSE as well as Securities and Exchange Commission (SEC).

Ellah Lakes stated that the primary objective of the acquisition was to strengthen its balance sheet, restore customer confidence, provide access to new markets, improve operations and create organisational efficiencies that will drive profitability and increase shareholders’ value.

According to the company, the board of directors and management consider this business combination to be in its best interest as the transaction will help to revitalise management and create access to diversified expertise and financial strength.

The company added that the acquisition would also help to improve administrative and operational efficiencies as well as strengthen its market position by increasing access to new products and markets.

With the acquisition, Ellah Lakes appointed Mr. Chuka Mordi as its Managing Director with effect from June 12. Mordi took over from Mr. Frank Ellah, who remains on the board as a non-executive director. Prior to appointment,  Mordi was a director in Telluria and the Managing Partner of CBO Investment Management.

Commenting on his appointment, Mordi said he was happy to lead Ellah Lakes into a new era of growth.

“I am very excited to be taking up the position of Ellah Lakes Managing Director. The combination of Ellah Lakes and Telluria establishes a platform with a significant existing land portfolio, access to finance and investments in the domestic production of oil palm and a variety of cash crops. I look forward to an exciting future as we put Ellah Lakes back on a path to growth,” Mordi said.

Mordi has an impressive track record across all segments of finance both in Nigeria and the United Kingdom. He has over two and a half decades of experience in private equity investing, investment banking, and investment research. He holds a Philosophy degree from King’s College, University of London.

Speaking during the listing of the additional shares, NSE Chief Executive Officer, Mr Oscar Onyema, commended the board and management of Ellah Lakes and other professional parties for success of the acquisition deal.

He said the listing marked the beginning of a new era for the company from the previous shut down of its operations due to militant activities and vandalism of its assets.

He noted that the new management team had successfully revived the company’s operations and turned around its listing status at the NSE.

“The Exchange recognises the role played by the board, management and other parties in the Telluria Limited acquisition transaction. We also commend ongoing efforts to restructure and diversify the company’s operations from fish farming to a more competitive business in oil palm cultivation and processing. We believe that this new business strategy will position the company as a major player in the agriculture sector,” Onyema said.

He said Ellah Lakes should consider leveraging the NSE platform to raise capital to fund its future business expansion.

He urged the company to continue providing the stock market with timely information about its strategic plans, operational developments and financial projections, pointing out that the market is driven by timely, relevant and accurate information.

Shareholders of Forte Oil Plc have earned about N8.53 billion in capital gains after the Nigerian Stock Exchange (NSE) gave approval to a N64.9 billion divestment deal by the oil and gas group’s major shareholder and Chairman, Mr. Femi Otedola.

The Nation had last week reported that authorities at the NSE had approved the full divestment of the majority equity stake held by Otedola in Forte Oil Plc in a transaction worth N64.89 billion. Otedola holds 982.97 million ordinary shares of 50 kobo each in Forte Oil through direct and indirect shareholdings, representing 75 per cent majority equity stake in the indigenous oil and gas group.

The Nation’s check yesterday indicated that Forte Oil’s share price has risen by 24.44 per cent from its last week’s opening value of N25.75 per share to open yesterday at N32.30 per share, representing net capital gains of N8.53 billion.

Forte Oil was the highest gainer at the equities market in the previous week, a feat it repeated in the opening trading session on Monday.

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Market analysts said investors were revaluing the oil and gas company after the divestment deal valued it at N66.01 per share. The transaction price of N66.01 per cent still represents about 104.4 per cent premium on the opening share price at the NSE yesterday.

A document obtained by The Nation had indicated that the Exchange had approved application for the block divestment of the 75 per cent majority equity stake held by Otedola in favour of Ignite Investments and Commodities Limited at a price of N66.01 per share.

Otedola had last December announced that he planned to sell his 75 per cent majority equity stake in Forte Oil to Prudent Energy, which will be investing through Ignite Investments and Commodities Limited.

The December 2018 announcement came after shareholders had in May 2018 approved a restructuring plan pushed by Otedola-led board of directors aimed at restructuring the group’s operations by divesting from its upstream services and power generating businesses and the sale of its downstream business in Ghana.

The Chartered Institute of Stockbrokers (CIS) has awarded scholarships to 31 financial journalists to undergo the institute’s Diploma Two Progamme in Securities and Investment Market.

At a ceremony to confer the awards on Tuesday in Lagos, the institute said the scholarships further demonstrated its determination to invest in human capital for overall development of the market, especially in the area of information dissemination.

Theinstitute stated that the programme will not only deepen the beneficiaries’ knowledge of the market but pave the way for them to aspire to become professional securities dealers.

Chartered Institute of Stockbrokers (CIS) President AdedapoAdekoje said the awards were part of the Corporate Social Responsibilities (CSR) of the institute aimed at improving the skills of those who cover the capital market for professional reportage.

He noted the propensity for market information by stakeholders in the capital market ecosystem and the roles of financial journalists in the process.

“It is hardly contestable to say that investors, especially in Nigeria, form their opinion of the capital market from what they read in the mass media. In recent years, this has been further amplified by the social media. It is therefore critical that financial journalists are well- informed about the market such that they can give enlightened and balanced reporting,” Adekoje said.

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According to him, in recognition of the very important role of Journalists  in  the  securities  and  investment  industry,    the  CIS  council approved  a  scholarship  scheme  that  will  enable  outstanding  financial  journalists undertake the CIS Diploma in Securities and Investment (DSI) programme at no cost. The scholarship will cover registration fees, examination enrolment fees and study materials.

He pointed out that the CIS Professional Diploma will  give participants immense  opportunities  to understand  the  capital  market  better  and  position them just  one  step  away  from becoming  chartered  stockbrokers.

“Domestic investors need  education  and  enlightenment. They need  to  know  the  facts behind the numbers that are unleashed on them every day. They need to appreciate that, over the long term investors in properly constructed stock portfolios will be net winners, as consistently reported by researchers. The   youths  must  be educated , market operators must be assisted to continually upgrade their skills, and most importantly, investors must be given the right and adequate information to protect them from losing their hard earned money. In all this, financial journalists, play a major role,” Adekoje said.

He explained that the CIS offers her students the choice of becoming a full-fledged omnibus broker or specialist in any of five stand- alone professional areas, including fixed income dealing, investment advisory services, equity dealing and commodity trading among others.

Guest Speaker and Publisher of BusinessDay Mr Frank Aigbogun who spoke on the “Roles of Financial Journalism in fostering capital market literacy“, urged the awardees to uphold the highest tenet of professionalism to contribute immensely to the growth and development of the market.

He advised the beneficiaries to be on top of the global developments in the financial market and leverage on their professional and technical knowledge to drive debates on topical economic issues in order to influence public policy positively.

Registrar, Chartered Institute of Stockbrokers (CIS), Mr Adedeji Ajadi explained that the scholarship had a life span of one year within which the beneficiaries would write examination twice. According to him, the examination is June and September. Ajadi urged them to attend study centers for intensive coaching.

Meristem Group has been adjudged the best forecasting research team in Nigeria, further demonstrating the underlying success points of the investment and wealth management group.

At the awards organised by Focus Economics, Meristem Research was awarded the overall best forecaster in Nigeria in 2018 ahead of many global forecasting institutions.

Also, for the second year running, Meristem Research won the award for best forecaster of Nigeria’s Exchange Rate, along with being the best in Gross Domestic Product (GDP) forecasting for the country.

Focus Economics is a leading provider of economic analyses and forecasts for 130 countries in Africa, Asia, Europe and the Americas, as well as price forecasts for 30 key commodities. The company is supported by an extensive global network of analysts. Since its launch in 1999, Focus Economics has established a solid reputation as a reliable source for timely and accurate business intelligence.

Head, Research Meristem Group Kemi Akinde said the awards show Meristem Group’s investment in adequate human and technological capabilities to ensure that the group provides timely and accurate information to its clients.

According to her, being voted as the best overall research team is a confirmation of the importance that the Meristem Group places on research and analyses as a backbone of decision-making.

“We are highly delighted to have won these awards. We know we place much emphasis and invest so much in our research capabilities and being confirmed by a global organisation is an exciting one for us,” Akinde said.

She assured that Meristem will continue to adhere to best global practices to ensure that it continuously surpass the expectations of its clients and other stakeholders.

The latest awards come on the heels of several awards won by various subsidiaries of Meristem. Meristem Stockbrokers Limited recently won the Best Stockbroking Firm award at the 2018 Banking and Financial Industry (BAFI) Awards organised by the BusinessDay Media Limited.