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… NSE provides certain clarifications on Premium Board membership
More issues and questions are beginning to crop up since the leading telecoms group, MTN Nigeria Plc listed on the floor of the Nigerian Stock Exchange (NSE).
Though it had been established before now that part of the sanctions handed down to the company over issues bordering on SIM Registration and deactivation breaches is to get listed on the Exchange, the speed of light with which it sealed a N200bn loan deal with a number of mega banks just two days after the listing have started eliciting industry reactions.
Whereas the Chief Research Officer, Investdata Consulting Limited, Ambrose Omodion, noted that “As we speak, seven banks had approved #200 billion loan facilities for MTN, which is not bad depending on what the company wants to achieve with that loan, coming two days after the listing. Does it mean that becoming a quoted company in Nigeria is one of the conditions to grant the facility? The urgent and speed at which the regulators approved the listing was something else.”
Continuing, he argued that “With the tight holding structure and small float of MTN Nigeria, the existing shareholders of the company are making it difficult for new shareholders to buy. The high demand is currently causing problem at the Exchange because local potential shareholders would definitely buy the shares at a very high rate.”
According to him, “Yes, the regulators claim to be protecting retail investors or encouraging their participation in this market are just paying lips service, because the shareholding structure of MTN Nigeria that holds the 23.92% are institutional and high net-worth individual investors that are using the Exchange to enrich themselves at the expense of retail investors that also want to be part-owners of the company.
“The 20% minimum free float is one of the listing requirements, but it seems to be a post-listing requirement since these companies are listed and given date to meet the minimum free float,” Omodion averred.
Besides, other analysts are further divided on the way and manner the shares were structured in a kind of closed-ended format ahead of approaching the market, arguing that if the original intention of MTN listing was to make the shares available for Nigerians, why then did they come to the market, made the cross deal and crossed it to themselves, which is not right.
Market pundits say up till now, not even a unit is available for trading and queried why listing the shares in the first place?
However, other analysts are of the view that they want to enjoy the price appreciation alone, believing that the shareholders are holding the shares and waiting for it to appreciate to a certain level before they offload, which is not right. There are too many controversies, but it is just that it is already listed. They must make it available, market watchers say.
In view of the market technicalities and experts views on the scarcity of MTN shares, market operators are already accusing MTN Nigeria of deviating from their initial plan to encourage Nigerians to partake in their wealth creation process through the listing, as no single unit has been made available to stockbrokers to sell to their clients.
However, whereas efforts to get response from MTN failed at press time, the attention of the NSE has been drawn to the critical issues raised in various print and social media platforms regarding the listing of MTN Nigeria Communications Plc (MTN Nigeria) on the Premium Board of The Exchange.
The Exchange in a statement made available to Business Hilights noted that in view of its commitment to operating a fair, orderly and transparent market, “we deem it important to clarify these issues”.
On Post-Listing Liquidity of MTN Nigeria Shares, NSE averred that “Where a company lists following an Initial Public Offering, shares are expected to be available for trading on the day of listing. In a Listing by Introduction, however, no shares have been offered for subscription by the company prior to listing”.
“Thus, without any intervention, it is possible that there will be no shares available for trading on the listing date. Indeed, currently, no rule of The Exchange compels shareholders in a listed company to tender their shares for trading. Shareholders are at liberty to trade their shares at any time and price suitable to them. Thus, in order to stimulate trading in the shares of companies that List by Introduction, the NSE’s practice is to urge the company to make shares available on the day of listing. In the case of MTN Nigeria, the NSE had requested the Company as part of the listing process to make shares available and The Exchange expects the company to do that.
Continuing, the Exchange explained that “Since the listing of MTN Nigeria on Thursday, May 16, 2019, a total of 105,301,759 shares valued at N12,231,997,316 have traded in three (3) days. These trades were carried out by ten (10) Dealing Member Firms in 134 cross deals/negotiated deals.
“According to the Rulebook of The Exchange, when a Dealing Member or Authorized Clerk has an order to buy and an order to sell the same security at the same price, the Dealing Member or Authorized Clerk may “cross” those orders at a price at or within The Exchange’s best bid or offer. A variant of this is the negotiated deal, which describes a situation where a cross deal is executed between two Dealing Member Firms at a price which may be within The Exchange’s best bid or offer or with the approval of The Exchange, outside the best bid or offer. Because cross deals involve clients of the same Dealing Member Firm on both sides of a trade, significant issues have been raised that Dealing Members who have not been involved in the cross deals have been unable to trade on behalf of their clients.
“The Exchange is not unconcerned about this state of affairs. Indeed, Council members of The Exchange urged brokers to discuss with their clients about possible sales of shares.
“As an Exchange that champions transparency and equity for all stakeholders in our market, we have received stakeholder feedback concerning our present rules on cross dealing and will consider the issues raised as part of our sustained efforts to ensure our market remains equitable for all stakeholders. We believe in market forces as the most efficient methodology for price discovery. Demand and supply will interact to discover appropriate prices as trading activities continue in the market.
On the MTN Nigeria’s Free Float Valuation, NSE disclosed that “There appears to be a misconception that a concession was given to MTN Nigeria on the minimum free float required for companies listed on The Exchange. According to Rulebook of The Exchange, free float is defined as the number of shares that an Issuer has outstanding and available to be traded on The Exchange. It includes all shares held by the investing public, and excludes shares held directly or indirectly by promoters, directors and their close relatives; strategic investors holding five percent (5%) and above of the issued share capital; or government.
“The Exchange’s rules for listing on the Premium Board (which is the board in which MTN Nigeria is listed) require a Company to have a minimum free float of twenty percent of its issued share capital or that the value of its free float is equal to or above N40 billion on the date The Exchange receives the Issuer’s application to list. MTN Nigeria met with the free float requirement of N40 billion. The free float of MTN at the time of listing was in excess of N90 billion. Our rules are readily available on the website of The Exchange at www.nse.com.ng.
“Investor protection is very important to us at The Exchange and we have taken necessary steps to ensure that our market is fair and orderly. In 2016, we acquired NASDAQ’s SMARTS platform to proactively detect and deter manipulative tendencies, gather intelligence and execute risk based supervision of flagged participants. We have also implemented other initiatives aimed at providing investors with timely information on the compliance status of our Dealing Members and Issuers including BrokerTrax, our member compliance report, and Compliance Status Indicator (CSI) codes (for Issuers).
“In addition, we have institutionalized our investor education program and launched X-Academy in June 2017, because we have identified investor education as a veritable tool to galvanizing informed investments and necessary step towards protecting investors in our market.
“Whilst we believe we have addressed the concerns raised, we will like to assure our stakeholders and the general public that The Exchange will continue to uphold global best practices in its business operations and will sustain engagement with its stakeholders to continually develop regulatory frameworks that ensure our market completely reflects our values of ambition, fairness and inclusion.
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