De-listing of companies from the official list of the Nigerian Stock Exchange (NSE) is such an occurrence that affects investment of shareholders, the companies themselves, potential investors and even the regulators since it causes reduction in numbers of entities under its watch.
As part of its regular competent check towards ensuring and sustaining healthy corporate entities on board the nations’ capital market, the NSE has expelled not less than 22 companies between 2016 and 2017 over non-performance and failure to meet the required post-quotation standards.
This may be a worrisome experience for shareholders who will no longer be able to make money from the shares they own in the companies. Shareholders make money through capital appreciation, dividend or bonus from investing in the shares of quoted companies.
Data obtained from the Exchange showed that the delisted companies included Cappa and D’Alberto, Intercontinental Bank Preference shares, IPWA, G Cappa and West African Glass Industries.
Others were Investment & Allied Insurance, Alumaco, Jos International Breweries, Adswitch, Rokanna, Vono Products, Lennards Nigeria, P.S. Mandrides & Company, Premier Breweries, Costain, Navitus Energy, Nigerian Ropes, Beco Petroleum, M Tech Communication, MTI, UAC and Ashaka Cement. Seven-Up Bottling Company, African Paints and Afrik Pharmaceuticals were delisted in 2018.
Company de-listing is the process of removing a registered (listed) firm from the official list of the stock market either voluntarily or by compulsion. Either way is occasioned by low performance or inability of a company to meet its obligations across board.
It will be recalled that under a voluntary delisting window (which seldom happens), a quoted company can decide to delist from the Exchange due to reasons such as merger/acquisition. On the other hand, the NSE can compulsorily delist a firm when it fails to meet up with post-quotation standards.
Against this background, some capital market analysts pointed out that if the de-listing trend persists, it would naturally translate to a reduction of market capitalisation, the more important one being reduction of the diversity in listed securities, which would impact adversely on market liquidity.
According to them, some firms decided to quit the Nigerian capital market due to slow demand arising from weak economic growth in the country and currency crisis that stifled raw material imports in the period, others argued that it was because both the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) failed in their responsibilities to issuers that voluntary de-listing gained ground among issuers.
“Obviously, if the owners of the companies that chose to delist believed in the regulators, they would not contemplate delisting,” a capital market analyst who does not want his name in print has clarified. He warned that the immediate effect of quoted securities offering to delist was the blow on the image of NSE as an avenue for raising capital and trading in the securities of listed companies.
Prof. Sheriffdeen Tella of the Economics Department, Olabisi Onabanjo University, Ago-Iwoye, Ogun, said that the development was due to the economic situation. Tella explained that the Nigerian economy had not performed creditably in the last three years. “The economy entered recession in 2015 and started coming out sluggishly towards the end of 2017.
“A depressed economy cannot encourage investments, either direct investment or portfolio investment, which has to do with the stock market activities. So, potential new entrants into the stock market were not encouraged to get listed on the market by the state of the economy,” Tella said.
He explained that those that were delisted were companies that either withdrew voluntarily or were removed by market regulators for non-performing, noting that they were all products of recession.
In the same vein, Sola Oni, Stockbroker and CEO, Sofunix Investment and Communications, said the stock market was a barometer that gauges the mood of the economy. He added that companies had suffered untold hardship during the recession as production costs shot up and the purchasing power of clients dwindled.
According to him, raising fresh capital requires investors’ willingness to buy shares, and that quoted companies had to exercise caution in order not to risk under-subscription.
Oni, however, expressed optimism that the market would pick up going by the positive economic indicators. “There is light at the end of the tunnel as economic variables are showing positive signals. Some quoted companies had successfully floated rights issues and more will follow suit as the recession has ebbed away and investors’ hope is on the upbeat,” Oni said.
On the other hand, analysts at Proshare blamed companies like NBC Plc, Cappa & D’Alberto Plc for backstabbing the NSE on the indigenisation programme launched by the bourse on November 12, 1973, which offered them the opportunity to list their shares.
“Owners of the AG Leventis Group are simply telling Nigerians that they are no longer obliged to partner with them in their business, just as the owners of Cappa & D’Alberto have done, remaining aloof to indigenisation. They are not sensitive to the plights of the local investors as a result of their decision to quit the market,” Proshare analysts lamented.
The Exchange listed only five new companies: the Initiatives, in 2016, while Transcorp Hotels, Global Spectrum Energy Service, Jaiz Bank and Med-View Airline were listed in 2017.
The Chief Executive Officer, NSE, Oscar Onyema, said recently that companies in their life cycle would be listed, while others would be delisted over time. He said the development was the reality that exchanges around the world experienced.
“Companies will delist for different reasons from voluntary to regulatory delisting, mergers and acquisitions and other things that would cause them to delist. Our job is to make sure that we make it easy for companies to come in and if they want to leave, that they leave in an orderly manner.
“So, what we have tried to do with our listing rules in the last one to two years is that we have tried to enhance the rules to ensure that companies behave in an orderly fashion,” Onyema said.
However, the Acting Director General of Security and Exchange Commission (SEC), Mary Uduk, has set out plans to check the debilitating trend of delisting. To be able to come up with a lasting solution to the problem, Uduk said the Capital Market Committee (CMC) of SEC at its last meeting held in Lagos, was mandated to look into the real reasons why quoted companies were delisting from the NSE.
Besides, the highest regulatory body in the Nigerian capital market also promised that it would meet with shareholders’ groups to determine the reasons for the delistings.
Apart from putting a stop to excessive delisting of companies, Uduk said SEC will go the extra mile to see an improved listing of multinational companies in Nigeria on the capital market. “Increase in de-listing by public companies pose a threat to the market in view of the fact that quite a number of them are highly capitalised,” she reiterated.