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Published On: Mon, Jul 17th, 2017

Shareholders panic as more companies may be delisted

OKEY ONYENWEAKU |

As anxiety looms over the continued listing of a number of companies on the Nigerian Stock Exchange (NSE) shareholders are raising questions over the status of their equities after the proposed companies are delisted. Referring to past experiences when companies had been delisted and small stakeholders had walked away with empty wallets, a growing number of agitated investors in poorly performing companies are asking to be compensated for their patience and loyalty even if the companies are to turn private.

Despite the fears of small investor’s managers of the NSE have insisted that for companies to remain listed on the local bourse they must meet with the minimum listing requirements prescribed at the time of their quotation on the market.

Sounding the new call by the market regulator a top official of the Exchange who declined to be officially quoted as he was not authorized to speak on behalf of the Exchange, noted that, ‘we have given more than adequate notice to these companies to act responsibly and meet the minimal requirements of listing on the Exchange. The Stock Market is administered by rules and not passion, the hazy notions of market pricing by traders is a far cry from the precision of policies executed by regulators’.  According to him, ‘the madness of the market is modulated by the sanity of its rules’.

 Stock traders explain that delisting is a process by which a company on the Exchange is removed and barred from trading. A company can voluntarily ask to be delisted to become privately owned or a particular stock may be removed from an exchange because the company is not in meeting the Exchanges post listing requirements.

Over the years many companies have been deliberately delisted by the NSE while others have sought voluntary delisting.

In the last 14 years, not less than 85 companies have been delisted from the Nigerian Stock Exchange. Some of the companies delisted based on regulatory violations include Dumez Nigeria, Atlas Nigeria, Ceramics, Beverages Nigeria Enpee, Tate Industries, Maureen Laboratory, Rietzcot Nigeria, Intra Motors Nigeria, Grommac Industries, Onwuka Hi-Tek, Nigerian Lamps, Nigerian Yeast & Alcahol, Security Associate, Footwear, Ferdinand Oil Mills, Christlieb, BCN, Liz-Olofin & Companies, Oluwa Glass, Asaba Textile Mills, Aboseldehyde Labouratory, Epic Dynamic, Fadmad, Afprint, Nigercem, Daily Times, Albarka Airline, Foremost Dairies ,Wiggins Teape Nigeria ,Okitipupa Oil Palm, First Capital Investment & Trust, Flexible Packaging, Newpak, Krabo Nigeria, Tropical Petroleum, Nigerian Bottling Company, Nampak, Abplast, Udeofosin Garment, Hallmark Paper Product, West African Aluminium, Nigerian Wire Industry, IPWA, G. Cappa, West African Glass Industries, Investment & Allied Insurance, Alumaco, Jos International Breweries, Adswitch, Rokanna, Lennards (Nigeria), P.S Mandrides & Company, Premier Breweries, Costain, Navitus Energy and Nigerian Ropes and the most recent, Ashaka Cement Plc.

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 A number of companies were delisted voluntarily, they include; CFAO Nigeria Plc, Impresit Bakalori Plc, Nigerian Textile Mills Plc, Incar Plc , Nigerian Bottling Company (NBC) Plc, United Nigeria Textile Plc, Bank PhB. Plc, Spring Bank Plc, Afribank Plc, Intercontinental Plc Oceanic Bank Plc, Finbank Plc and Ecobank Nigeria ( Now absorbed into the ETI group structure)

According to the Nigerian Stock Exchange some of the firms were delisted for reasons ranging from voluntary, regulatory, nationalised, mergers or acquisition.

Investigations by Business Hallmark revealed that most of these firms have been delisted for reasons related to non- compliance with post listing requirements.

Shareholders have expressed discomfort over the rate of delisting of stocks on the Exchange (NSE). First, the market generally sees a delisting as a major negative sign that can damage investor confidence in the companies. Second, moving off one of the major exchanges can result in less interest from institutional investors, which can in turn result in lower volume and reduced liquidity for shares. Third, the company’s operations become private and are no longer subject to the scrutiny of a regulator.

Smaller shareholders have urged listed companies to make regulatory compliance a priority and avoid failure to pay annual listing fees and meeting other fiduciary (legal) responsibilities. ‘To avoid being delisted, the management of a quoted company should endeavour to comply with the NSE post-listing requirements’ a shareholder said.

However, it is still possible to trade delisted companies on the Over-the-Counter (OTC) market which has more relaxed rules compared to the major exchange, or on the Pink Sheets, which has almost no regulation or listing requirements.

Chief Executive Officer of the Nigerian Stock Exchange, Mr. Oscar Onyema had on May 20, 2011 enumerated the benefits to firms taking advantage of the bourse to trade securities.

According to him, listing of a company’s shares exposes it to a broader membership of the financial community and wider range of investors including market makers, stockbrokers, institutional investors, retail investors, unit trusts/mutual funds, hedge funds, etc.

While listing of one’s shares enhances investor relations through contact information made available through exchange listing, it creates source of capital leverage – listed companies can issue shares to the public or undertake right issues to existing shareholders

 Listing exercise ensures a free market for buyers and sellers to meet, assess and trade capital for ownership and vice versa and continuity is guaranteed after the promoter’s demise.

Market stakeholders argue that when a company gets delisted, it’s a result of bad things, not good ones. Companies can be (and frequently are) delisted for failing to maintain the requirements set forth by their exchange. Some of these requirements are based on a company’s ability to meet filing deadlines, while others relate to the company’s performance in the stock market.

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On the other hand, there is yet a group that believe that getting delisted from a stock exchange isn’t a bad thing — that is, when the company delists by choice.

More often than not, when a company gets delisted, it’s as a result of bad things, not good things happening. Companies can be (and frequently are) delisted for failing to maintain the requirements set by their exchange. Some of these requirements are based on a company’s ability to meet filing deadlines, while others relate to the company’s performance on the market.

Timothy Adesiyan, President National Shareholders Association of Nigeria (NSAN) told Business Hallmark in a telephone conversation that delisting companies from the Nigerian stock Exchange has not been favourable to shareholders who have invested their hard-earned resources in the market.

”Delisting companies or firms from the Nigerian stock exchange is a punishment to shareholders and most times we hear that a company we have invested in has been delisted on the pages of the Newspaper. The worse of it is that directors of these companies a lot of times escape with our monies

”I must say the companies that delist voluntarily sometimes pay us something with which we acquire shares of other companies” said Adesiyan

In the same vein, National President, Progressive Shareholders Association of Nigeria,(PSAN) Mr. Boniface Okezie agrees that some of the companies that are delisted have paid shareholders off. Okezie disclosed that such delisted companies as Afprint Plc, Kaduna textile and others. He however, blamed the Securities And Exchange Commission for not following up on others that have refused to pay shareholders off after delisting. ”SEC is weak in this respect. SEC attends the meetings as an observer where some of these decisions are taken and it more often than not fails to follow through” said Okezie.

Livid are investors in the recently suspended 17 companies over their failure to comply with the corporate and extant post-listing requirements. These companies include;

Premier Paints, African Alliance Insurance, Equity Assurance, Fortis Microfinance Bank, Guinea Insurance, Resort Savings & Loans, Sovereign Trust Insurance, African Paints (Nigeria).

Also suspended are, EkoCorp, Evans Medical, Goldlink Insurance, Great Nigeria Insurance, Omatek Ventures, Union Dicon Salt and Union Homes Savings & Loans and Universal Insurance Company.

Shareholders of these firms are confused as to the future of their investments.

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