The rising cost of operations and the subsequent capital flight have become pressing concerns leading to the delisting of quoted companies from the Nigerian stock market. Shareholders are deeply worried about the uncertainty, multiple taxation, poor infrastructure, and other macro-economic challenges that have created a high cost of doing business. They are urging the government to prioritize the creation of an enabling environment that supports business operations, Entrepreneurng.com
The recent announcement of delisting by Coronation Insurance Plc has intensified the apprehension among investors, as it delivers a significant blow to the market. Shareholders are calling upon regulators to take proactive measures to prevent a renewed wave of voluntary delistings from the exchange. They emphasize the need to implement fresh initiatives that deepen the market, encourage more listings, and incentivize companies to maintain their listing status.
A particular concern raised by shareholders is the offer price arrangement favored by majority shareholders, which leaves minority shareholders at a disadvantage. They point to the sharing formula employed by Coronation Insurance as an example, where minority shareholders are left with no option but to offer their shares at a discounted price. This inequitable practice further exacerbates the challenges faced by minority shareholders.
Shareholders argue that unless appropriate measures are taken to improve the ease of doing business in Nigeria, the current harsh operating environment will continue to impact the profit margins of listed firms, hinder their growth prospects, and ultimately compel them to exit the market.
Coronation Insurance, in a letter to the Nigerian Exchange Limited (NGX), has expressed its intention to delist from the exchange after receiving an offer from Coronation Capital (Mauritius) Limited. The offer proposes to acquire shares of the company at a price of 65 kobo per share. In a proposed share acquisition notice to the NGX and the investment community, the company’s secretary, Mary Agha, disclosed that the offer price represents a 30 percent premium over the company’s last traded price of 50 kobo on August 12, 2021.
However, shareholders have raised objections to the 65 kobo share buyout formula, contending that the appropriate offer price should be set at 80 kobo. They argue that this price should reflect the selling price when the market was officially informed of the decision to delist. The company, on the other hand, has fixed the price based on the date it submitted the application to the relevant regulatory authorities.
Data from the Nigerian stock exchange reveals that between 2016 and 2021, a total of 27 companies were forcibly delisted from the exchange. In 2016, 14 firms underwent regulatory delisting, followed by four in 2017, two in 2018 and 2019, one in 2020, and four in 2021. Moreover, during a seven-year period from 2015 to 2022, approximately 44 firms, valued at nearly N350 billion, were delisted from the daily official list.
Further analysis of the data indicates that out of the 36 firms delisted between 2015 and 2019, 25 were forcibly delisted due to non-compliance with post-listing requirements, eight chose voluntary exits, and three opted for mergers. The consequences of these delistings were significant, with notable companies such as Diamond Bank, Ashaka Cement, Seven up Bottling Company, Cappa & D’Alberto, IHS, Costain West Africa, MTECH Communication, MTI, and Nigerian Ropes experiencing market capitalization losses totaling close to N200 billion. These figures clearly demonstrate the negative impact of delistings on the stock market.
Conclusion ( shareholders)
Given the scale of capital flight and the detrimental effects on the market, it is imperative for the Nigerian government and regulatory bodies to take concerted actions. Measures should be implemented to enhance the ease of doing business in the country, promote investor confidence, and create a favorable environment for listed companies to thrive. By addressing the concerns of shareholders, encouraging more listings, and ensuring fair practices, the Nigerian stock market can regain its stability and attract sustainable investments.
Source: The guardianÂ
