• Tuesday, July 23, 2024
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Voluntary delisting blurs NGX growth

NGX launches Impact Board for sustainable instruments

Voluntary delisting of quoted companies from the local bourse is stunting the growth of the Nigerian Exchange Limited (NGX), analysts have said.

At least 24 companies have delisted voluntarily from the stock exchange in the last 21 years, leading to fewer trading activities and slower market growth.

There have been listings by hitherto unquoted firms in 21 years, but there have also been significant voluntary delistings from the market.

Voluntary delisting occurs when a company opts for the purchase of its shares or moves to an over-the-counter (OTC) market, says Investopedia, while involuntary delisting usually happens as a punishment when a company cannot meet the requirements set by the exchange.

MRS Oil Nigeria Plc recently got the approval of its shareholders for a voluntary delisting of its issued shares from the daily official list of the NGX.

Following the NGX approval of Capital Hotels Plc application to delist its entire issued share capital from the Nigerian Exchange Limited, the entire shares of the company were on November 3, 2023, delisted from the daily official list of the NGX.

Also, Courteville Business Solutions Plc got approval for application to delist its entire issued share capital from the Nigerian Exchange Limited in 2023. The entire issued share capital of Courteville was, on November 10, 2023, delisted from the NGX.

In November 2023, Union Bank of Nigeria finalised the process of obtaining approval to delist its shares from the NGX upon which shareholders of the bank will receive a scheme consideration of N7.70 per share. The acquisition of the minority shareholding led to the application to delist Union Bank of Nigeria from the NGX.

Read also: NGX suspends trading in shares of 8 companies

Also, GlaxoSmithKline Consumer Nigeria Plc (GSK), in January 2024, notified the NGX, its shareholders, and other stakeholders that it had received the Securities and Exchange Commission (SEC)’s formal approval of its proposed scheme of arrangement. GSK Consumer Nigeria also said the order of the Federal High Court sanctioning the scheme of arrangement has also been obtained, adding that an application for the delisting of its shares from the NGX will be submitted.

Meanwhile, SEC had, in March 2024, rejected the buy-out of minority shareholders and delisting plans of PZ Cussons Nigeria Plc. PZ Cussons Plc had filed an application with the organisation in November 2023 for its no-objection to the proposed scheme. The offer was increased from N21 per share to N23 per share as announced on November 9, 2023.

The delisting trend on the NGX shows some other companies that have voluntarily delisted from the Nigerian Exchange Limited (NGX) since 2002.

They are: Union Diagnostic & Clinical Services Plc (January 7, 2022), United Nigeria Textile Plc (2011), Studio Press Nigeria Plc (January 7, 2022), Seven-Up Bottling Company Plc (March 5, 2018), Poly Products Plc (July 6, 2005), and Paints and Coatings Manufacturers Nigeria Plc (August 17, 2018).

The also include: Nigerian Textile Mills Plc (2008), Nigerian Bottling Company Plc (2011), Newrest Asl Nigeria Plc (May 13, 2019), Nampak Plc (2011), and IHS Nigeria Plc (May 6, 2015).

Other companies that delisted voluntarily from the Exchange are: Impresit Bakolori Plc (2002), Incar Plc (2010), Global Spectrum Energy Services Plc (July 11, 2023), Great Nigeria Insurance Plc (January 25, 2019), First Aluminium Nigeria Plc (July 31, 2019), and Enpee Plc (2008).

Likewise, Dangote Flour Mills Plc delisted voluntarily on November 18, 2019; Continental Reinsurance Plc (January 17, 2020); CFAO Nigeria Plc (2007); Avon Crown Caps and Containers Plc (September 18, 2017); Ardova Petroleum Plc (July 26, 2023); 11 Plc (May 7, 2021), and A.G. Leventis (Nigeria) Plc (January 7, 2020).

When the Nigerian Exchange Group Plc (NGX Group) convened its 63rd annual general meeting in Lagos recently, the Temi Popoola-led management of the NGX Group emphasised the importance of government policy and alternative asset classes.

He highlighted the role of government policy in driving listings and citing historical successes such as the indigenisation policy of the 1970s.

“Policy can drive companies to list if the government wills it, and it worked during the indigenisation policy of the 70s,” he stated.

While addressing the global trend of de-listings, Popoola pointed to the Johannesburg Stock Exchange’s experience, noting the significant decrease in the number of listings over the years. However, he offered a positive perspective, suggesting that a decrease in listed companies could be offset by an increase in market capitalisation.

“If you have 10 companies that delist with an aggregate value of N50billion, you can have two listings with an aggregate value of N5trillion,” he noted.

According to Chris Ogunbanjo LP, firm of sector specialist lawyers, copious reasons a quoted company may decide to voluntarily delist from the NGX include: costs, inability to raise equity capital, and restructuring.

“It is generally more cost-effective to be a private company than a quoted public company. Operating as a quoted company could be expensive for a company which is not making profit, coupled with a huge debt profile.

“Voluntary delisting of a company enables it to reduce its exposure to regulators and minimise costs. Listed companies have post-listing obligations they must adhere to in order to sustain their listing status and those who cannot meet the financial demands of those obligations tend to consider delisting as one of the cost reduction measures,” the legal firm noted.

They further noted that a quoted company may also choose to voluntarily delist due to internal or external restructuring.

Read also: These stocks made NGX Africa’s best in H1

The voluntary delisting of Union Bank was said to be an effort to attract larger private investments to reconsolidate the bank’s position as one of the top pioneer banks in Nigeria. In May, 2023, Union Bank received an offer from its core shareholder, Titan Trust Bank Limited, to acquire the shares of all minority shareholders in Union Bank after the completion of core investors’ sale of a majority shareholding to Titan Trust Bank Limited, a subsidiary of TGI Group.

Recently, Emomotimi Agama, director-general, SEC, said: “From green bonds to social impact investing, from derivatives to exchange-traded funds, both from the conventional and the non-interest prisms, the spectrum of financial instruments available to investors is vast and diverse.

“Fintech solutions offer increased access to the capital market, streamlined transactions and enhanced transparency. By fostering a regulatory environment that encourages responsible adoption of these technologies, we can unlock their full potential and indeed, the potential of our nation.”