As more companies move to delist from the capital market, stakeholders have called for improved protection for shareholders in order to boost investor confidence in the market. Oluwakemi Abimbola reports
As the Nigerian Exchange Limited regains its upward movement after the sharp dip following the general elections, investors have another challenge to deal with; companies seeking to delist from the NGX.
At least three quoted companies have expressed interest in delisting from the NGX. Energy company, Oando Plc is one of them. Days after releasing its unaudited report for 2021, Oando disclosed plans to delist from the NGX.
The company said that it received an offer from its core shareholder – Ocean and Oil Development Partners Limited- to acquire the shares of all minority shareholders in Oando and subsequently delist from NGX and re-register as a private company.
Under the buy-out scheme, minority shareholders will be paid N7.07 in cash for every ordinary share they hold.
Oando’s plan to delist from the exchange had been kicked against by the minority shareholders who had expressed reservations about the company’s plans to delist after years of not paying dividends or releasing results.
Reacting to the development, the Chairman Emeritus of the Independent Shareholders Association of Nigeria, Sunny Nwosu, slammed the company and lamented that shareholders of Oando, who have not been paid dividends in years, now have to compulsorily sell their shares.
He said, “This is not part of corporate governance, this is cheating! We have seen a lot of disrespect for shareholders, especially for people who think they are doing good investments by going to the capital market.”
In February, another oil firm, Ardova, announced plans to delist from the NGX following interests from its core investor, Ignite Investments and Commodities Limited, to acquire the shares of minority investors.
According to the company, the proposed offer was at a price of N17.38kobo per share, representing a premium of 22.44 per cent and 24.38 per cent to the 30-day and 60-day volume weighted average share price of N14.19 and N13.97, respectively on November 30, 2022; being the last trading day before the offer.
Another company in the process of delisting is Union Bank of Nigeria Plc which has been acquired by Titan Trust Bank.
In a statement signed by its Company Secretary, Somuyiwa Sonubi, the bank said, “Under the terms of the scheme, the shares, being the outstanding shares of the bank not already held by Titan Trust, will be acquired by Titan Trust for a consideration of N7.00 per share. Union Bank has received the ‘No objection’ of both the Central Bank of Nigeria and Securities and Exchange Commission.”
The NGX in April suspended trading in the shares of an integrated oil & gas offshore supply vessel services company, Global Spectrum Energy Services Plc, as it prepares to delist from the local bourse.
According to a list on the website of the NGX, tens of companies have delisted in the last 10 years for reasons ranging from voluntary delisting, merger with another company and regulatory reasons.
Some of the companies include Diamond Bank Plc with N56bn in market cap, which merged with Access Bank Plc in 2019. Ashaka Cement with N38.1bn market capitalisation delisted based on merger with Lafarge Africa Plc.
Seven Up Bottling Company delisted voluntarily from the NGX in May 2021 and now trades on NASD OTC Exchange. Similarly, Cappa and D’Alberto as well as IHS Towers, also exited voluntarily.
Meanwhile, Costain West Africa, MTECH Communication, MTI, and Nigerian Ropes were forcibly delisted by the NSE.
In 2020, A.G Leventis was delisted from the daily official list of the NGX while five companies were delisted in 2021. These companies include Portland Paints and Products Plc, Unic Diversified Holding Plc, Nigerian-German Chemicals Plc, Evans Plc and 11 Plc. Union Diagnostics and Clinical Services Plc and Studio Press Plc were also delisted in 2022.
Delisting allowed
For some market operators and shareholders, the delisting of companies is allowed as the market is structured for free entry and exit. They, however, called on regulators to improve on their oversight duties and protect minority investors.
The Chief Executive Officer of APT Securities, Garba Kurfi, in a chat with The PUNCH, said that it was essential that minority investors were not cheated as companies delist from the NGX or exit the capital market.
He said, “It is free entry and it is free exit. That is one of the cardinal things about the market. Unless that principle is adopted and accepted, we don’t have a capital market. Listing is by choice, for any company who decides to delist, we say goodbye. But what we are saying is that the minority shareholders should not be cheated.
“We have seen it; Dangote Flour Mill, he sold to South Africa’s Tiger Brand, they remained listed. Tiger Brand sold it back to him and after getting it, he sold it to Olam. Olam acquired Dangote Flour Mill and delisted it. Nobody complained. Why? Because the price they paid Alhaji Aliko Dangote, N24, is the same price they paid minority shareholders. When the price is right, if you get delisted, there are no issues.”
For the President, Noble Solidarity Association, Matthew Akinlade, being a listed company protects investors and improves the corporate governance of the companies.
He said, “When companies are on NGX, regulatory requirements, disclosures, and transparency are a lot better than when they delist and they are on their own. The level of disclosure is now optional for them when they delist.
“I think our regulators have to weigh issues very carefully before they grant permission for companies to get out of NGX. There may even be companies who come on the NGX, raise funds and exit. And the investors will just be on their own, which is not good.
“The regulators give them approval to come and investors are relying heavily on their approval. Some of these companies sometimes even want to exit at a lower rate than the market price and they (regulators) are not raising eyebrows. It is a big challenge.
“I think our regulators have to improve on their regulatory functions to protect the poor investors. It is very important.”
Supporting Kurfi’s stance, the National Coordinator, Youths Alliance Shareholders Association, Jibunoh Uche, said that any seeming attempt to shortchange minority investors impact the entire investment community negatively.
Uche, who is also the National Youth Leader of the Shareholders Association of Nigeria, said, “There is nothing wrong with delisting. However, in a situation where you buy shares at a high price and after a lot of time when the company has not paid any dividend, it now decides to delist at a lower price; then there is a problem.
“When a company does that, it kills investors’ desire. In this market, people invest to make money and when companies do these things like these, investors are discouraged. It tells a lot about the stock market and the investment community as a whole. I expect the regulators to be more aggressive, put a lot of things in place so that any company cannot just come and delist.”
Market capitalisation
The APT boss added that while some companies have delisted from the market, about seven companies have listed in the last 10 years and they hold about 60 per cent of the market capitalisation.
He said, “Don’t forget that from 2010 to date, in the last 10 years, we have got about six companies who have listed on the Nigerian Exchange, one of them is Dangote Cement, second MTN, Airtel, Bua Cement, Bua Foods, Geregu. Today, these six companies control more than 60 per cent of the entire market capitalisation. So all the other listed companies have been reduced to 40 per cent. This shows that there is progress.”
Based on NGX data, MTN Nigeria has a market cap of N4.732tn, Dangote Cement has a market cap of N4.600tn, Airtel Africa’s market cap is N4.415tn, Geregu Power has a market cap of N759bn, Bua Cement stands at N2.98tn and Bua Foods’ market cap is N2.106tn.
“If we can get six companies listed in the last ten years and they control 60 per cent of the market, then bye-bye to those who want to delist.
“We are not happy about the delisting but we cannot stop them. We have seen companies who have delisted and we have seen companies who decided not to be listed on the NASD (National Securities Dealer Association). A company can decide to delist from the NGX and list on the NASD or become a limited company. All we are saying is, take care of the minority shareholders; pay them well.”
Regulators
In the wake of the delisting plans of Oando, the Director General, Securities and Exchange Commission, Lamido Yuguda, expressed commitment to protecting shareholders in the capital market.
Speaking at the 2023 first quarter Capital Market Committee meeting, Yuguda told journalists, “Protection of investors is the central mandate of the commission and when the commission protects investors, we do not discriminate between minority and majority shareholders.
“When there is a case of delisting, the application for the delisting comes to the commission and we go through it very carefully to ensure that the shares of the company being delisted are fairly valued because fair valuation is what protects all the shareholders.”
