Shareholders lament delisting of firms, as economy struggles

Anxiety has gripped shareholders in Nigeria over the high spate of delisting of companies from the Nigeria Exchange Limited. Just recently, Oando Plc and Ardova seem to have perfected plans to discontinue the further trading of their shares on the platform of NGX Group.

A few months back, a delisting exercise conducted by the Nigerian bourse affected 11 Plc (formerly Mobil Oil Nigeria Plc), which voluntarily exited the NGX following a resolution passed at the Annual General Meeting last year in favour of the proposal to delist its 360,595,262 ordinary shares listed on the bourse.

“The purpose of delisting is to enable the company explore strategic opportunities, alliances and collaborations that can bolster earnings and/or provide synergised benefits with little or no regulatory obligations,” the company said in February this year.

In the previous year, three companies were delisted; namely Continental Reinsurance Plc (voluntary), Anino International Plc (regulatory), and Cement Company of Northern Nigeria Plc (after merging with BUA Cement Plc).

In 2019, Dangote Flour Mills Plc (voluntary), Diamond Bank Plc (merged with Access Bank Plc), First Aluminium Nigeria Plc (voluntary), Fortis Microfinance Bank Plc (regulatory), Great Nigeria Insurance Plc (voluntary), Newrest ASL Nigeria Plc (voluntary) and Skye Bank Plc (regulatory) were delisted from the exchange.

About four companies were delisted in 2018, namely Seven-Up Bottling Company Plc (voluntary), Paints and Coatings Manufacturers Nigeria Plc (voluntary), African Paints (Nigeria) (regulatory) and Afrik Pharmaceuticals Plc (regulatory).

Some other companies including Ashaka Cement Plc (merged with Lafarge Africa Plc), Avon Crown Caps and Containers Plc (voluntary), Beco Petroleum Products Plc (regulatory), Mtech Communications Plc (regulatory), MTI Plc (regulatory), and UTC Plc (regulatory) had exited the stock exchange in 2017.

In 2016, 14 companies were forced to delist, namely ADSwitch Plc, Alumaco Plc, Constain (W.A) Plc, G. Cappa Plc, Investment & Allied Insurance Plc, IPWA Plc, Jos International Breweries Plc, Lennards (Nigeria) Plc, Navitus Energy Plc, Nigerian Ropes Plc, P.S Mandrides & Company Plc, Premier Breweries Plc, Rokanna Plc and West African Glass Industries Plc.

Vono Products Nigeria Plc also left the stock market that year following the merger with Vitafoam Nigeria Plc.

These other companies: Evans Medical Plc, The Tourist Company of Nigeria Plc, Nigerian German Chemicals Plc, Roads Nigeria Plc and Unic Diversified Holdings Plc have also been said to be in the process of delisting.

Shareholders have become uncomfortable with this trend as they are being denied the opportunity to invest in these companies and partake in enjoying returns from them. In fact, Nigerian shareholders believe that investing in shares have offered them the greatest potential for growth (capital appreciation) over the long haul. For instance, those who have had the patience to stick with stocks over long periods of time, say 10 years and above, generally appear to have been rewarded with strong and positive returns.

Notwithstanding the risks involved in investment generally, shareholders of these delisted firms are not happy they would miss the following benefits: the potential to earn higher returns, the ability to protect your wealth from inflation, the ability to earn regular passive income, the pride of ownership, liquidity, diversification, the ability to start small, among others.

While the Director-General, Securities and Exchange Commission, Mr Lamido Yuguda, has consistently assured that the commission will always work collaboratively with the Exchange as well as continue to support it to grow the market capitalisation and reduce the incidence of delisting, the President of the New Dimension Shareholders Association, Mr. Patrick Ajudua, says that shareholders are not happy over the spate of delisting on the NGX, particularly by the oil and gas firms.

“We have seen the delisting Of Mobil, the proposed delisting of Oando and now Ardova. The delisting is akin to a father seeing his children dying during his lifetime where as it ought to be the children burying their father.

The regulators should look at this development from that point of view because if the companies are no more who are going to regulate, it becomes a question.

For us as shareholders, we are investing in these companies for future returns on our investments, but what we are seeing is an act of shortage in our investment plan via delisting’’, he said.

Similarly, the Chairman of the Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, who expressed sadness that opportunities were slipping through their hands given the delisting of firms said that market regulators must pursue friendly policies and initiatives to push the market forward.

Similarly, “Delisting is not good for the market. When they leave, it will prevent the market from playing the role of a barometer of the economy. It discourages minority shareholders to invest more in the stock market, “he said.

Banks flocked the Nigerian Exchange Group (Nigerian Stock Exchange) in 2004 and 2006 to raise funds to meet the regulatory N25 billion shareholders’ funds during the banking consolidation. This offered most of them the opportunity to list on the exchange.

Whereas it was tough, traumatic and painful to achieve this mark, but firms that could not access funds from the capital market then were almost seen as not only inferior and weak but also lacked the confidence of the people or even had image problem. Or so it seemed, even though the blue-chips which were strong felt so strong.

Therefore, many firms not only the banks combed the market for cheap funds to capitalize, consolidate and they all worked hard to list on the exchange.

Listing a company on the stock exchange, experts explain, improves its image in relations with partners, investors and the media. According to them, a listed company attracts the confidence of customers, suppliers and banks in its financial stability and in the products and services it offers. Notwithstanding, firms are still delisting from the market. In fact, it appears that more firms have delisted in the past few years than the number that have listed.

Delisting entails the removal of a listed security from a stock exchange. The delisting of a security can be voluntary or involuntary and usually results when a company ceases operations, declares bankruptcy, merges, does not meet listing requirements, or seeks to become private.

All over the world, it is not uncommon to have companies delist their membership of the exchange and others successfully achieving their long-time ambition of listing. In the United States of America, Sears Holdings declared bankruptcy in 2018 and delisted from Nasdaq but the stock continued to trade over the counter.

Similarly, in May 2020, J.C Penney, a department store chain filed for Chapter 11 bankruptcy and delisted from NYSE. On the flip side, Eastman Kodak and American Airlines made their shares available on the exchange by listing.

In Nigeria, about 36 firms delisted from the stock market from 2016 to 2021 while a latter data showed the Nigeria Exchange Limited forced about 23 firms to delist. While nine exited voluntarily, four delisted from the Exchange as a result of mergers.