The Nigerian Stock Exchange (NSE) has launched a process to review and change the equities market structure with a view to creating an optimal market design that facilitates improved market depth, liquidity provision and price efficiency.
Executive Director, Regulation, NSE, Tinuade Awe, said the the new market structure will create a level playing field for all market participants, and allow for the creation of new trading strategies.
According to her, under the new market structure, market makers and other dealing members will be able to participate across all trading sessions, which will further support competitive pricing, reduced spreads, and best execution.
She said the Exchange would be amending its rules and regulations to ensure that the market authorities have the necessary nimbleness and flexibility to address matters such as structure and timing of trading sessions, market intermediary roles, trading operations, parameters, responsibilities and restrictions among others.
She said the Exchange will be launching a ‘Market Model and Trading Manual for Equities Market’ that will provide the standard guidance for trading of equities on the Exchange, and which can be reviewed as the Exchange deems appropriate from time to time.
In a circular to stakeholders, Awe called for stakeholders’ contributions toward ensuring the success of the new market structure by making comments on the proposed amendments to the rules and regulations as well as the new trading manual.
“The Exchange views your participation as important to create public awareness and solicit the public’s feedback on the Manual and the proposed Rule amendments; and to improve the quality of the Manual and the proposed Rule amendments and thereby have a robust, well written Manual and set of Rules,” Awe stated.
She added that the Exchange will involve as many stakeholders as possible in the commentary process in order to achieve seamless takeoff of the new market structure.
The Nigerian Stock Exchange (NSE) has delisted the shares of Seven-Up Bottling Company (7-Up) Plc, closing down the non-alcoholic beverages subsector of the consumer goods sector. The delisting of 7-Up was reminiscent of the exit of its rival, Nigerian Bottling Company (NBC) from the Exchange.
Head, Listings Regulation Department, Nigerian Stock Exchange (NSE), Godstime Iwenekhai, confirmed the delisting, which was valued at N65.32 billion.
According to him, the delisting of the entire issued share capital of 7-Up was done last week sequel to approval of a scheme of arrangement to restructure and delist from the company from the Exchange by shareholders.
Despite strong protests from minority shareholders, the majority core investor of 7-Up-Affelka SA had on January 11, 2018 pushed through approval to acquire the outstanding 26.8 per cent shares held by the minority shareholders.
At a court-ordered meeting in Lagos, shareholders approved the scheme of arrangement for the acquisition. With this, Affelka SA will increase its ownership of the Nigerian soft-drink company to 100 per cent by acquiring all the outstanding and issued shares, previously held by the minority shareholders.
Affelka SA had on the eve of the court-ordered meeting increased its bid price by 10.9 per cent to N125. It had earlier offered N112.70 per share for the 171.54 million ordinary shares of 50 kobo each held by the minority shareholders.
In consideration for the transfer of the shares, a payment of N125 per scheme share will be made to each shareholder. This payment represents a 22.6 per cent premium on the last traded share price of Seven-Up on January 9, 2018 and a 27.6 per cent premium on the share price as at close of August 9, 2017 being the last business day prior to the date the initial proposal was received from Affelka.
Nigerian retail minority shareholders had decried the move by Affelka SA to buy out all minority shareholders and turn the 57 years old company into a wholly owned subsidiary.
Minority shareholders said the move by Affelka was in bad taste and called on capital market regulators to block the bid.
Founder, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said the decision by Affelka, which owns about 73 per cent, was an affront to the Nigerian consumers and shareholders, who had helped in building the soft drink company to its enviable position.
President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar, said Nigerian capital market regulators should protect minority shareholders’ interest in the transaction.
He added that Nigerian minority shareholders should look beyond immediate and short-term capital gain to implication of such acquisition, which will turn the company into a fully-owned foreign company.
Shareholder Activist and Co-Founder, Nigeria Shareholders Solidarity Association, Gbadebo Olatokunbo, said the Securities and Exchange Commission (SEC) should undertake a forensic audit of Seven-Up Bottling Company to unravel the reasons for the decline in the performance of the company in the past three years and the sudden interest of the foreign majority shareholder to acquire all the shares of the company.
“Though the rule of the game at the capital market is “free entry and free exit”, the rules insisted on equity on all dealings, therefore the Nigerian local investors are saying we want the forensic-audit of 7-UP since 2014, because we are yet to be convinced that the recent takeover notification of 7-UP is not fraudulent,” Olatokunbo said.
Constance Shareholders’ Association of Nigeria National President, Shehu Mikail said the decision was a surprise, calling for a thorough review of the decision by 7-Up.
However, Seven-Up Bottling Company Plc Chairman, Mr. Faysal El-Khalil, said the acquisition will create considerable benefits and opportunities for all stakeholders of the company while also helping to protect minority shareholders from a continuous erosion of value.
“Furthermore, Seven-Up Bottling Company Plc is again assured of Affelka’s long term commitment to the company and Nigeria,’’ El-Khalil said.
After years of bickering, the Nigerian Stock Exchange (NSE) has finally settled the lingering employment dispute with its former Director-General, Professor Ndi Okereke-Onyiuke, Lance Elakama and other executive staff members, The Nation has leant
The amicable settlement was reached, it was gathered, following the adoption of the Terms of Settlement between parties which has become a Judgement of a Federal High Court in Lagos, and same had since been fully implemented.
The NSE is an independent, Non-governmental and Self-regulatory Organisation (SRO) which has been at the vanguard of providing the platform for raising long term capital by companies, banks and government, among others for industrial and economic development.
It’s a source of funding federal and state governments projects through issuance of securities such as Development Bonds. It’s members include the Licensed Stock-Broking Firms, Issuing Houses/ Underwriters, Investment Advisers, Quoted Banks and Registrars of Quoted Companies.
Since its incorporation in the 60s, the operation of NSE was largely peaceful until August 2010 when the Securities and Exchange Commission (SEC) Director-General, Miss. Arunma Oteh, went to the NSE and announced the removal of Okereke-Onyiuke, and the Executive Management Staff; despite the fact that the Director General had in her letter of June 16, 2010, notified the Council of NSE of her Voluntary Retirement, effective 15th December, 2010.
However, it emerged last Thursday that ALL Disputes relating to the case of the former Director General and other Senior Executives, including former Assistant Director-General, Musa Elakama, have been amicably settled.
The SEC had, by a purported Forensic Audit Report (which neither the Director General nor the Staff were queried) accused theformer Director General and the Executive Management Staff of financial impropriety which culminated in the Securities and Exchange Commission (SEC) purportedly sacking Okereke-Onyiuke and others in 2010. SEC is not the employer and NSE is not government owned.
Okereke-Onyiuke successfully challenged her removal as well as the said Forensic Audit Report respectively in Suit No. FHC/L/CS/963/2010 and FHC/L/CS/1430/2010 before the Federal High Court, in which the Forensic Report and her purported Removal were set aside, declared Null and Void, and the Court awarded her N500million damages done to her Good Name, via her Counsel, WoleOlanipekun & Co.
Both SEC and NSE appealed against the judgements, but the Court of Appeal again Ruled in favour of Okereke-Onyiuke. The parties sheathed their swords and adopted Alternative Dispute Resolution (ADR) Mechanisms to resolve the lingering disputes, the new thinking in the Administration of Justice in Lagos State.
The Landmark Settlement was eventually reached in the said Federal High Court Suit filed by the Chambers of Chief BolajiAyorinde & Co who led s consortium of lawyers, including Aluko&Oyebode and SimmonsCoopers Partners in Suit No. FHC/L/CS/405/2015, while the former NSE DG and others, were represented by Messrs Shola Lamid and Co, with the Terms of Settlement filed and signed by parties and their counsel adopted it and it became Judgement of the Court.
In a statement, counsel to Okereke-Onyiuke and Elakhama, Shola Lamid of Fortune Chambers, confirmed that the disputes have been Amicably Resolved and Implemented in line with the said Judgment of Court.
Notable among the terms of settlement, is that Okereke-Onyiuke was NOT SACKED by the Nigerian Stock Exchange, but “shall RETIRE from her former position as Director-General and from other associate subsidiary companies of The Nigerian Stock Exchange, such as Central Securities Clearing System (CSCS) etc where she was the Chairman. “
It was also gathered that the Pension of the former NSE boss has been paid by the Nigerian Stock Exchange via Nigerian Life and Pension Company (NLPC), and she is being paid monthly, although forfeited her GRATUITY and damages awarded to her in the said suit for wrongful dismissal and damage to her name, because she ‘does not want to Destroy the The Exchange and the Stock Market she Nurtured (as a ‘Mother’ for 27 years).
The said Terms of Settlement also Recognized and Confirmed Professor Okereke-Onyiuke’s Title to the Land on which she built her residence at Ikoyi Lagos, while same had since been fully implemented in compliance with the enrolled Order of Court.
“It is believed that with the Landmark Settlement reached on court cases causing distractions in the running of the Exchange, the NSE can face the future, conclude its Demutualization Plan (which Okereke-Onyiuke Initiated)and settle down to perform its financial role as Platform for Raising Long-Term Capital for Economic and Industrial Development of Nigeria.
“As provided in the said Terms of Settlement, the NSE is also free to Consult, when necessary, its former DG Okereke-Onyiuke, on any issue involving the Capital Market in order to benefit from her Wealth of Experience and Legacy Knowledge of Worldwide Stock Markets,” Lamid said.
Major oil stocks posted price depreciation on the Nigerian Stock Exchange (NSE) on Monday just as the market indices recorded marginal growth of 0.02 per cent.
The News Agency of Nigeria (NAN) reports that Seplat dipped N13.70 to close at N571.40 to lead the losers’ table.
Total trailed with a loss of N11 to close at N217, while Mobil Oil shed N9.50 to close at N180.50 per share.
Dangote Cement was down by N1 to close at N259, while United Bank for Africa declined by 45k to close at N12.50 per share.
Conversely, International Breweries topped the gainers’ table, growing by N2.85 to close at N59.85 per share.
PZ Industries followed with a gain of N1.15 to close at N24.15, while NASCON appreciated by N1.05 to close at N21.60
Guaranty Trust Bank advanced by 75k to close at N49.35, while Redstar increased by 30k to close at N6.30 per share.
Consequently, the All-Share Index rose marginally by 8.59 points or 0.02 per cent to close at 42,579.48 compared with 42,570.89 achieved on Friday.
Similarly, the market capitalisation which opened at N15.277 trillion rose by three billion naira or 0.02 per cent to close at N15.280 trillion.
Cement Company of Northern Nigeria was the most active stock, trading 134.89 million shares worth N2.25 billion.
Transcorp followed with an account of 34.15 million shares valued at N71.04 million, while FBN Holdings traded 21.78 million shares worth N250.07 million.
Access Bank sold 20.58 million shares valued at N 270.03 million, while Fidelity Bank exchanged 20.49 million shares worth N 61.30 million.
In all, the volume of shares transacted closed higher as investors bought and sold 384.26 million shares valued at N5.47 billion achieved in 4,774 deals.
This was in contrast with a turnover of 308.43 million shares worth N6.40 billion exchanged in 4,356 deals.
The Nigerian Stock Exchange (NSE) has launched a Corporate Governance Index (CG Index), which will track the performance of prequalified companies, using their market capitalisation, free float and corporate governance rating scores.
The CG Index will be reviewed on a bi-annual basis at which point other companies that have met the requirements may be added to the Index or companies that have had their ratings suspended or withdrawn may be removed.
The Index is expected to be an important tool for investors keen on investing in well governed companies as well as corporates eager to distinguish themselves on the ground of governance.
Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said the new index will increase transparency in the capital market and provide investors additional data points to make well-informed investment decisions.
“The launch of the CG Index is an important milestone to strengthening listed companies by tracking their corporate governance practices. This index will increase transparency in our market and provide investors additional data points upon which to make sound decisions.
“I congratulate the companies that have successfully completed the process and I expect that they will be more positively looked at whilst trying to raise and access capital within or outside of our jurisdiction,” Onyema said.
He pointed out that sound corporate governance practices will lead to higher economic performance, provide more sources for capital investment and increase the creditability of shareholders.
“The NSE CG Index is highly correlated with other NSE Indices. By far, the highest correlation coefficient was recorded with NSE 30 Index at 99.6 per cent and closely followed by the NSE All Share Index (ASI) at 99.3 per cent. In essence, all indices moved in tandem in nearly all cases. The observed correlation between the CG Index and ASI reinforces observed trend in some emerging markets, including Brazil, China and Italy. It can, therefore, be inferred that companies that determine the direction of the ASI in these markets are mostly companies with good corporate governance practices,” Onyema said.
Authorities at the Nigerian Stock Exchange (NSE) have approved the migration of leading commercial banks-United Bank for Africa (UBA) Plc and Access Bank Plc to the Exchange’s premium board. The migration of the two banks will increase the number of companies on the top-rated board to six.
A regulatory report at the weekend indicated that the NSE had approved the migration of UBA and Access Bank from the main board to the premium board, which was designed as a market for the most capitalised stocks with the best corporate governance and liquidity. The premium board was meant to showcase Nigeria’s best stocks to the global market.
The Nation had earlier reported the approval for the migration of Lafarge Africa Plc to the premium board. There are currently three companies listed on the NSE’s premium board including Dangote Cement, FBN Holdings and Zenith Bank International.
The Exchange had indicated that the premium board is aimed at providing a platform for greater global visibility for eligible Nigerian entities, which will make it easier for them to attract global capital flows and reduce the cost of borrowing.
The new rules of engagement being enforced by the Nigerian Stock Exchange (NSE) is already a subject of heated debates amongst stakeholders many of who have expressed clear and present dangers of impending lull in the capital market, reports Ibrahim Apekhade Yusuf
By its very nature, the capital market is always abuzz with excitements, especially when operators are on the floor of the Exchange, wheeling and dealing.
Of course, like all humans, operators also have their fair share of worries too, especially when they think their interest may be adversely affected.
Interestingly, the scenario playing out now is not music to the ears of the operators, no thanks to The Nigerian Stock Exchange’s Amended Par Value and implementation of the New Pricing Methodology Rules, which took effect few weeks ago.
Crux of the matter
Apparently worried by the incidence of malfeasance, especially amongst unscrupulous players, the NSE at the twilight of last year announced some possible change in the rules of engagement for all operators.
“The amended stratification of price movements, price limits and tick sizes aims at improving liquidity, narrowing spreads, and ensuring that all prices improving (up/down) transactions are material, making the market more efficient for all participants,” said Mr. Abimbola Babalola, HoD Market Surveillance and Investigations Department, in a statement obtained by The Nation.
What the new rule entails
The new rules will effectively remove the current rule, which places minimum allowable price to trade for any stock at its nominal value, irrespective of the market forces.
“Pursuant to the implementation of the approved amendments to the Pricing Methodology and Par Value Rules, as contained in Rules 15.29 and 15.30 respectively of the Rulebook of The Exchange, 2015 (Dealing Members’ Rules) this report, which is based on market values of equities as at December 31, 2017 is hereby provided for guidance in the implementation of the Rules effective January 29, 2017,” Exchange said.
The implementation of new pricing rules removed the stopgap that has supported stocks at their nominal value. The new rules will allow shares of quoted companies to trade for as low as one kobo.
Besides, the new rules will effectively remove the current rule, which places minimum allowable price to trade for any stock at its nominal value, irrespective of the market forces.
The new rules stipulate that “notwithstanding its par value, the price of every share listed on the Exchange shall be determined by the market, save that no share shall trade below a price floor of one kobo per unit.”
Par value is the nominal value of a share as stated in the Memorandum of Association of the company while price floor means the amount below which the price of one unit of a share shall not be permitted to trade, and the minimum amount which must be paid for a share in the event of a drop in the unit price of that share.
Regulatory documents obtained at the weekend also indicated that the amendments to the pricing technology at the stock market will see a categorisation of quoted companies under three groups with different pricing rules.
The tick size, the minimum price movement by which the price of a trading instrument can change, will also be lowered to as low as one kobo. Although all quoted companies shall continue to trade within the current pricing band of 10 per cent maximum allowable change per day.
Under the new groupings and pricing rules, which shall take effect on Monday January 29, 2018, stocks under the first category, Group A, shall consist of large-cap equities that are priced at N100 per share or above for at least four of the last six trading months, or new security listings that are priced at N100 or above at the time of listing on the Exchange.
The second category, Group B, shall consist of medium-priced equities that are priced at N5 per share or above, but less than N100 per share for at least four of the last six months, or new security listings that are priced at N5 per share or above but less than N100 per share at the time of listing on the Exchange.
The third category, Group C, where majority of listed companies fall, shall consist of equities that are priced at one kobo per share or above, but below N5 per share for at least four of the last six months, or new security listings that are priced at one kobo per share or, but below N5 per share at the time of listing on the Exchange.
The new rules expectedly link price movements and minimum quantity of equities traded that will change the published price of an equity security. Stocks under Group A shall have price change with minimum of 10,000 units; stocks under Group B shall have price movement with a minimum of 50,000 units while stocks under Group C shall have price change with minimum volume of 100,000 units.
The tick size, which is the minimum price movement that any equity shall trade, shall also be linked to the groups. Group A will have a tick size of 10 kobo, Group B, five kobo while Group C will have a tick size of one kobo. This implies that the share price of each stock shall be allowed to move up or down in multiples of its tick size.
Starting revelations
The Nation’s check at the weekend indicated that there were only nine stocks under the “high-priced stocks” category of Group A. These include Dangote Cement Plc; Mobil Oil Nigeria Plc; Nestle Nigeria Plc; Nigerian Breweries Plc; SIM Capital Fund; Skye Shelter Fund; Nigerian Energy Sector Fund (NESF); Total Nigeria Plc and Seplat Petroleum Development Company Plc
There are indications that at least two-thirds of quoted companies fall under the Group C and about a quarter of quoted companies may drop below their nominal values upon the implementation of the new pricing rules.
A large part of quoted companies have been stagnant at their nominal value for many years and have been on supply, a market euphemism for shares glut and sell pressure. Most of the stocks have been sustained by the current rule of a stopgap of nominal value.
Further checks by The Nation showed that about two-thirds of quoted companies fall under the Group C and about a quarter of quoted companies may drop below their nominal values when the new rules come into effect.
NSE boss, Oscar Onyema
Kudos for new trading rules
Expectedly, retail shareholders have expressed support for the planned implementation of a new pricing rule that will allow stocks on the Exchange to trade below their nominal value and as low as one kobo.
President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar said the new rule will lead to more effective price discovery at the stock market.
“It is good, there are many stocks that are not worth more than one kobo at the market but currently pegged at 50 kobo because of the nominal value rule,” Umar said.
National President, Constance Shareholders’ Association of Nigeria, Mr. Shehu Mikail, said the new pricing rule may lead to increased liquidity in the dormant stocks since new price discovery may encourage investors to take risks in the low-priced stocks.
According to him, the new pricing rule may enable dormant companies to attract new investors who are looking for bargains.
“The new rule will create opportunity for most of the companies that have not been traded for a long time to come back on board. It may also make directors of the companies to take their share prices more serious,” Mikail said.
However, Chairman, Standard Shareholders Association of Nigeria, Mr. Godwin Anono, said the new rule will lead to more losses for investors, urging the Exchange to sustain the current rule that limits price decline to the nominal value.
He described the new rule as a double-edged sword that can fuel hostile acquisitions and cause disruptions in the market.
He said the Exchange should focus on providing more accurate information about the market and protecting the integrity of the market rather than tinkering with rules.
“It is another way of grounding a lot of companies. Leave it at 50 kobo, there are many ways of stimulating price discovery, it is not good,” Anono said.
A double edged sword
Expectedly, the new rules have continued to generate mixed reactions from players in the capital market, with majority wary over the possible rippled effects on the health and stability of the market.
While some market pundits have said the new pricing rules will enhance the price discovery mechanism of the stock market, others are not persuaded that things would go well on the long run.
Amongst a few players, the new rules are a source of worry just as other stakeholders express fears over the likely outcome of the regulatory move.
Investigation revealed that not less than 47 equities will be affected in the new arrangement, cutting across 11 sectors among the 177 listed companies.
Further probe into all the market categories revealed that 19 of the 47 dormant equities are in the insurance sector, while services, communication and technology have eight and four equities respectively. While it may “boost” the nominal value of the equities concerned, it will also contribute to their poor rating in the market.
In the view of the managing director of HighCap Securities Limited, Mr. David Adnori, the implication is that all those stocks that were artificial kept at the par value of 50 kobo will now have to find their level.
He added that the price of any stocks in the market will be a correct reflection of the market value for the stock just as he pointed out that the market is an auction market based on supply and demand at any given price and if it is the market price the demand for the stock will go up and will stimulate demand in the securities.
Besides, he also noted that the impact on the market capitalisation of stocks currently trading below N1 were insignificant, as this will not affect the total market capitalisation, even as he said that the market capitalisation of those stocks was not up to one-tenth of Dangote Cement total capitalisation.
Echoing similar sentiments, the chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said that the new rule is a welcome development that will boost trading activities and propel companies’ performance and corporate governance that will support the share price.
“This is time investors should beware of penny stocks that can easily move to one kobo” he said, adding however that “Investors with a lot of penny stocks in their portfolio could be among the first to be hit by a sell of.”
Stocks between 50 kobo per share and N1 per share, he maintained, could be in the firing line as investors reassess their values.
Another stockbroker who would not be named, noted that this development may likely lead to some company reducing the nominal value of their shares to one kobo per share via a scheme of share reconstruction, saying, “That way they could escape the wrath of a massive value accretion. Whether that will be possible will depend on the regulation that SEC proposes around this.”
For Managing Director/CEO, APT Securities and Funds Limited, Mallam Kurifi Garuba, the implications are many but the most important is that it will increase trading of stocks which is lacking now and most of them can go as low as one kobo per share.
A bird’s eye view of the new trading rules
Also speaking on the merits and demerits of the new trading rules introduced by the NSE, in the view of Mazi Okechukwu Unegbu, Managing Director/Chief Executive, Maxifund Investments and Securities Plc, said the rules while not bad in themselves could hardly curtail the excesses of the recalcitrant operators.
As far as he concerned, he would rather the management of the Exchange appeal to the conscience of the operators.
“You must be able to do what l call moral suasion to these people because if you don’t, it only scratches the problem on the surface. When you have a company, there are people in that company that probably will not disobey all your rules but you’ve got to use your experience in terms of managing corporate governance to be able to control your human resources. So while they’re doing these things, they should not do it in such a way that’ll affect others.”
While some operators argued that there was no robust engagement with statkeholders before the policy initiative was made public, Unegbu, a lawyer was quick to add that the Exchange did give stakeholders a lot of room to deliberate on the policy before it was unveiled to the public.
“They (The Exchange) give exposure drafts and ask you to comment on it on how it’s good for the market and stakeholders and operators normally comment that this is okay or this is not okay. You put in your views and once you put your views they don’t close their eyes to those issues.”
Informed that some of the rules are sometimes observed in breaches by those who want to achieve selfish aims, he concurred.
“I agree with you. But I’m saying that when that happens, it should not impact negatively on others. The culprits should be handled with care, given the opportunity to defend himself following the rules of fair hearing. Agreed, some may have ulterior motives in breaking the rules, some may not have. So it’s for the regulator to see and really go in-depth, if possible employ external investigators to ensure that they do not throw away the baby and the bath water.”
The new pricing rule introduced by the Nigerian Stock Exchange (NSE) has continued to elicit mixed reactions from stakeholders in the capital market, many of who have expressed fears about the likely outcome of the regulatory move.
The new rules stipulate that “notwithstanding its par value, the price of every share listed on the Exchange shall be determined by the market, save that no share shall trade below a price floor of one kobo per unit.”
Expectedly, the new rules have continued to generate mixed reactions from players in the capital market, with majority wary over the possible rippled effects on the health and stability of the market.
Investigation revealed that not less than 47 equities will be affected in the new arrangement, cutting across 11 sectors among the 177 listed companies.
Further probe into all the market categories revealed that 19 of the 47 dormant equities are in the insurance sector, while services, communication and technology have eight and four equities respectively. While it may “boost” the nominal value of the equities concerned, it will also contribute to their poor rating in the market.
Chairman, Standard Shareholders Association of Nigeria, Mr. Godwin Anono, said the new rule will lead to more losses for investors, urging the Exchange to sustain the current rule that limits price decline to the nominal value.
Another stockbroker who would not be named, noted that this development may likely lead to some company reducing the nominal value of their shares to one kobo per share via a scheme of share reconstruction, saying, “That way they could escape the wrath of a massive value accretion. Whether that will be possible will depend on the regulation that SEC proposes around this.”
Also speaking on the merits and demerits of the new trading rules introduced by the NSE, in the view of Mazi Okechukwu Unegbu, Managing Director/Chief Executive, Maxifund Investments and Securities Plc, said the rules while not bad in themselves could hardly curtail the excesses of the recalcitrant operators.
As far as he concerned, he would rather the management of the Exchange appeal to the conscience of the operators.
The Nigerian bourse has approved the voluntary delisting of Seven-Up Bottling Co after it received a takeover bid from its majority shareholder aimed at restructuring the soft drinks bottler.
The stock exchange, which suspended trading in the company’s shares in January, said in a notice that it approved the delisting last week.
In January, Seven-Up’s minority shareholders backed a $70 million buyout bid by majority investor Affelka, the investment firm of the Lebanese El-Khalil family.
The bottler received the takeover proposal last August after posting losses, in a deal aimed at restructuring the 7-Up, Pepsi and Mirinda distributor.
Seven-Up Bottling last traded at 101.97 naira per share, valuing the company at 65.32 billion naira ($214 million).
The soft drinks bottling industry has been hit by slow demand arising from weak economic growth in Nigeria, Africa’s most populous nation, which recently emerged from a recession and a currency crisis that stifled raw material imports.
The Seven-Up Bottling takeover comes six years after its main rival Coca-Cola delisted its local bottling unit in a $136 million buyout deal to expand the business and fend off competition.
The Nigerian Stock Exchange (NSE) will today begin the implementation of new rules that give market authorities greater surveillance and control over block divestment and voluminous deals.
This is being done to block loopholes that could be exploited by brokers to manipulate the stock market.
Market sources said the amended rules on block divestment and large trades will enable the Exchange to proactively identify insider dealings and underlying forces behind some market-shaping transactions.
While the existing rules on block divestment and large trades are not explicit about prior approval and applicable sanctions are not tied to value of the transactions, the new rules specifically require prior written approvals of the Exchange for such transactions and carry stricter sanctions tied to the value of the transactions.
A market source said dealers and corporate insiders were known to take advantage of price-sensitive information without prior identification of such insiders. An investigation of an indigenous oil and gas company by the Exchange had shown such large-volume transactions that bordered on insiders’ dealings.
The new rules which take off today change the thresholds for the designation of large trades and block divestment as well as instituting prior approval as a necessity before consummation of such trades.
A copy of the new rules and amendments obtained by The Nation at the weekend indicated that contrary to the existing designation of large volume trade as five per cent of issued share capital of a company, a volume of 80 million shares or units or shares worth N800 million would henceforth be regarded as large volume that requires prior approval of the Exchange.
As such, all dealing members or authorised clerks who wish to trade in any equity amounting to 80 million shares or units or more, and less than 30 per cent of an issuer’s total listed equities or trade value equal to, or in excess of N800 million, or such other threshold value or portion of listed equities as the Exchange may from time to time prescribe, for a given client account shall apply for and obtain the written approval of the Exchange before executing such large volume trades.
Under the existing rules, a stockbroker is only required to notify the Exchange of any large-volume trade before or within 24 hours of executing such trades. The new rules make it mandatory to “apply for and obtain the written” approval of the Exchange before execution of such large trade.
Also, while under the existing rules failure to obtain written approval by a stockbroker on its large volume trades carry 10-day suspension and a fine of N150,000, the new rules place a 10-day suspension and a fine of not less than five per cent of the block divestment or large trades.
The Exchange also seeks to control block divestment through a more detailed regulatory framework. According to the new rules, a trade shall be treated as a block divestment where it involves a transfer of shares amounting to 30 per cent or more of a company’s total listed shares and the transferee shareholder is thereby able to take control of the listed company.
Also, block divestment will apply where the acquisition of additional shares by a shareholder of a listed company, that would result in an increase in the shareholder’s total holdings to 30 per cent or more of company’s total listed shares; and the shareholder is thereby able to take control the listed company and where less than 30 per cent of a company’s total listed shares but will lead to a material change in the board or management of a listed company.
“A dealing member that receives a mandate to execute a block divestment shall apply to the Exchange for approval to effect the mandate and shall not execute such a mandate without the said approval. Where a dealing member is in doubt as to whether a transaction will be treated as a block divestment, the dealing member should consult with the Exchange in order to address the doubt,” the rules stated.
Application from the dealing member to the Exchange shall be in the form of a letter from the dealing member informing the Exchange about the mandate received and requesting approval for the block divestment. The letter shall be accompanied by a copy of the mandate which shall be in the form of a letter or an electronic mail from the shareholder to the dealing member and such other documents as the Exchange may from time to time require to be submitted for approval of a block divestment.
Last Thursday, investors struck N3.84 billion deals for the transfer of 1.745 billion ordinary shares of Sterling Bank Plc on the normal trading floor of the NSE. The deals represented about 6.06 per cent equity stake in Sterling Bank. Investors struck 108 deals for the exchange of 1.745 billion ordinary shares of 50 kobo each of Sterling Bank valued at N3.84 billion. The turnover volume represented 6.06 per cent of the total issued share capital of Sterling Bank. Sterling Bank has 28.79 billion ordinary shares outstanding at the NSE.
