Nigeria: NSE Defends MTN's Listing As Market Awaits SEC Findings

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22 May 2019

The Nigerian Stock Exchange (NSE) yesterday defended the listing of MTN Nigeria Communications Plc, saying it followed due process and did not violate listing rules just as the illiquidity of MTN shares continues while a few shareholders continue to reap big.

The share price closed yesterday at N131.70 per share after four days of trading, representing almost 50 percent rise in price.

The NSE, in a statement, said there seemed to be a misconception that a concession was given to MTN Nigeria on the minimum free float required for companies listed on the exchange.

It said its Rule Book defined free-float as the number of shares that an issuer has outstanding and available to be traded on the Exchange.

This includes all shares held by the investing public, and excludes shares held directly or indirectly by promoters, directors and their close relatives; strategic investors holding five per cent and above of the issued share capital; or government.

The NSE's defence came just as investors urged the Securities and Exchange Commission (SEC) to ensure that the ongoing investigation into the process that led to the listing of MTN Nigeria on the NSE is thorough, especially as it relates to the crossing of shares.

However, MTN in a reaction to the push-back that has trailed its listing, said it met all listing conditions and violated no guidelines.

In its statement, the NSE pointed out that its rules for listing on the Premium Board, which is the platform on which MTN Nigeria is listed, require a company to have a minimum free float of 20 per cent 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.

"MTN Nigeria met with the free float requirement of N40 billion. The free float of MTN at the time of listing was in excess of N90 billion," NSE added.

According to the NSE, where a company lists following an initial public offering, shares are expected to be available for trading on the day of listing, while in a listing by introduction, no shares have been offered for subscription by the company prior to listing.

It said: "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.

"We will like to assure our stakeholders and the general public that the exchange will continue to uphold global best practices in its business operations and will sustain engagement with its stakeholders to continually develop regulatory frameworks that ensure our market completely reflects our values of ambition, fairness and inclusion."

THISDAY had reported that investors on the NSE and stakeholders waiting to purchase MTN shares through an initial public offering might do so at a very high premium whenever the telco decides to float the IPO.

This was because of the free float accommodation and some other waivers MTN Nigeria was granted by the capital market regulators to pave the way for its listing last Thursday.

The telco company, in a statement yesterday by its Company Secretary, Uto Ukpanah, said its listing on the NSE led to the creation of a new telecoms and technology asset segment for the NSE.

This, the telco stated, also deepened the equity capital markets base of the country, which makes it possible to broaden the shareholding base of MTNN over time.

"The listing by introduction means that the existing shares of MTN Group (78.8 per cent), the Nigerian investors (19.4 per cent) and other investors (1.8 per cent) are listed. All MTNN shareholders will be free to trade their shares on the NSE.

"MTN Nigeria met all of the conditions required to list as a member of the Premium Board of the NSE and was required to publish a commencement listing price. The outstanding matter relating to the Attorney General of the Federation created a high degree of uncertainty over the valuation of MTNN, which makes it difficult to determine a fair price.

"For MTN Nigeria at present, the associated risks and potential returns could not be fairly assessed and priced. As a result, and in the best interest of all shareholders, both the current and future, the commencement listing price was set at N90 per ordinary share, which was determined with reference to the private shares sale transactions by MTNN shareholders over a 180 trading day period," it said.

According to MTN, the N329 billion medium term facility it signed in 2013 would be fully paid by November 2019, while the N200 billion facility it signed last week formed part of its new debt program, in line with the medium term business plan of the company.

"The new facility, when drawn down, will be used to support our medium term capital expenditure projects; fund our working capital needs, meet operational expenditure requirements and position the company to take advantage of future expansion opportunities.

"The preference shares have not been redeemed. The redemption of the preference shares was always envisaged as a necessary part of simplifying the capital structure of the company ahead of, or soonest after listing. After obtaining necessary regulatory approvals, the preference shares redemption will be taken from the distributable reserves of the company and paid for with cash generated from its operations," it added.

Meanwhile, Afrinvest has expressed concerns over the illiquidity of MTN shares on the exchange, adding that this is partly connected to the cheap valuation of the company at the point of listing.

"In our discussion with management, we discovered that the N90 listing price was arrived at using the average trading price of linked units at the over-the-counter (OTC) market over 180 days. We also obtained information that MTN Nigeria's shareholder loan of US$402 million was converted to cumulative preference shares linked to ordinary shares in 2008.

However, prior to the listing on NSE, the shares were delinked, and the ordinary shares were subdivided into 50 shares at 2 kobo per share from N1 per share. There are plans to redeem the preference shares worth N144.7 billion (US$402 million)," it said.

AfriInvest said the N1 trillion (US$5.2 billion) fine imposed on MTN in 2015 for not disconnecting unregistered SIM cards and the $2 billion fine slammed against the company by the Office of the Attorney General of the Federation in relation to taxes on the importation of equipment and payments to suppliers might be part of the reason for MTN's cheap valuation at listing and why the IPO is on hold.

Since the listing of the telco by introduction last Thursday, its share price has remained scarce in the market, thereby fuelling suspicion of possible manipulation.

Yesterday, it extended the gains as investors traded 110.719 million units of MTN for N14.582 billion in 292 deals, while its share price rose further by 10 per cent or N11.95 to close higher at N131.70.

THISDAY had reported that investors on the NSE and stakeholders waiting to purchase the shares of MTN Nigeria Communications Plc, through an initial public offering (IPO), might do so at a very high premium whenever the telco decides to float the IPO.

This was because of the free float accommodation and some other waivers MTN Nigeria was granted by the capital market regulators to pave the way for its listing last Thursday.

Since the listing of the telco by introduction last Thursday, its share price, has remained scarce in the market, thereby fuelling suspicion of possible manipulation.

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