The management of the Nigerian Stock Exchange (NSE) has appealed for calm over raging concerns regarding the listing by introduction of telecom giant, MTN Nigerian unit on the bourse, especially the unavailability of the stock for trading.
In an emailed statement early Tuesday, NSE clarified that listing by introduction implied that no shares have been issued by the company, and consequently, “without any intervention, it is possible that there will be no shares available for trading on the listing date.” This is different from the situation where a company lists following an Initial Public Offering, in which case its shares will be available for trading on the day of listing.
Stockbrokers and potential buyers of the stock have raised concerns over the paucity of MTN’s shares since its listing on the Premium Board of the NSE on Thursday, May 16, 2019.
Demand for the stock exceeded its supply for the three trading days, with the price rising 33.3 percent from N90 to N119.75 on Monday.
The Exchange explained that it has no rule currently that compels shareholders of a listed company to tender their shares for trading, adding that they “are at liberty to trade their shares at any time and price suitable to them.”
To stimulate trading in the shares of companies that list by introduction, NSE said, it urges such companies 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.”
MTN Nigeria Listed by Introduction. 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.
In the first three trading days since MTN’s listing from Thursday, NSE said a total of 105,301,759 of its shares valued at N12,231,997,316 were traded. These trades were carried out by ten Dealing Member Firms of the bourse in 134 cross deals/negotiated deals, it explained.
“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,” NSE said. Another variant of this is kind of deal, it said, is what it called a negotiated deal, which 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.
On the controversial issue of a low Free Float, the number of shares that an Issuer has outstanding and available to be traded on The Exchange, NSE said MTN met its criterial for a company listed on the Premium Board.
For listing on the Premium Board, a company is required to have a free float of 20 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. According to the bourse, MTN’s free float was higher than N90 billion.
Vincent Nwanma
