The listing of Transcorp Power on the Nigerian Exchange (NGX) has ignited significant controversy, bringing to the forefront concerns over the potential sidelining of minority shareholders and raising questions about the transparency of corporate practices within the Nigerian business community. At the center of this unfolding narrative is Tony Elumelu, a publicity-loving titan in the Nigerian business landscape, whose strategic decisions are under scrutiny for their potential to disadvantage smaller investors in favor of larger stakeholders.
The controversy has its roots in the broader context of Elumelu's business maneuvers, particularly the strategic positioning and eventual listing of Transcorp Power as an independent entity on the NGX. This move, intended to cement Transcorp Power's place in the Nigerian energy sector, has instead sparked debates over equity distribution and the preservation of shareholder value. Critics argue that the process mirrors previous instances where Elumelu's business strategies have seemingly marginalized minority shareholders, citing the spin-offs of United Capital and African Prudential Registrars from UBA Plc as precedents.
Intriguingly, whispers within authoritative business circles in Nigeria suggest that Elumelu's decision to list Transcorp Power might also be inspired by the strategic playbook of billionaire businessman Femi Otedola, an activist investor whose company, Geregu Power Plc, has in recent years cemented its position as the country's top energy supplier. Otedola's reaffirmation as a Forbes-listed billionaire earlier this year has apparently not gone unnoticed by Elumelu, who, some say, listed Transcorp in a dubious effort to pump its valuation and make the prestigious list himself.
While personal ambitions and strategic comparisons with industry peers provide a backdrop to the listing, the immediate concerns voiced by market insiders paint a starkly different picture of its impact on the NGX.
The listing, while ambitious in its aims, has not been without its critics. A well-respected Nigerian stock market broker shared insights under condition of anonymity, fearing possible retribution, while highlighting the core issues that have marred the listing's reception.
"I have always underscored the critical importance of immediate liquidity in establishing trust in the market," he said. "The listing of Transcorp Power highlights this issue even more. Regrettably, a mere 40 million shares were made available, representing only 0.05 percent of the total outstanding shares. This is a worrying indicator for the market. Offering such a small number of shares could project unfavorable impressions, especially to the global community."
He added: "Ensuring an adequate supply of shares is essential, particularly when the market has a high number of interested purchasers. The manner in which the listing was conducted was far from exemplary. In what appears to be a move to deter involvement, the shares were released in the pre-close session — a time when the market's true liquidity is obscured. The low number of shares put on offer seems to me to have been a deliberate attempt to limit buying opportunities."
In light of these significant concerns, efforts to reach out to representatives from Transcorp Power, the NGX, and regulatory bodies have been made to provide their perspectives and address the issues raised by critics and investors alike.
Elumelu's move could therefore be seen as either a shrewd attempt to emulate Otedola's success or an ill-conceived move given the listing's current reception and Transcorp's skyrocketing debt, which will significantly offset any new corporate valuation. Either way, it once again highlights the dynamic interplay between competition and emulation among the creme-de-la-creme of Nigerian business, reflecting the general trend of mimicking others in the quest for dominance.
Unlocking Value or Igniting Crisis?
The genesis of Transcorp Power's prominence in the Nigerian energy sector can be traced back to 2013 when Transnational Corporation of Nigeria Plc, under Elumelu's leadership, acquired the Ughelli Power Plant. This acquisition marked the beginning of an ambitious expansion that would see Transcorp Power become a dominant force in Nigeria's power supply chain, further bolstered by the acquisition of the Afam Power Plant in 2020. With an installed capacity of approximately 2,000 MW, Transcorp Power significantly contributes to Nigeria's electricity grid, accounting for 15.5 percent of the nation's total installed capacity.
The decision to list Transcorp Power on the NGX, through an introduction worth $1.1 billion, was paraded by company executives as a strategic move to unlock value for shareholders. However, the aftermath of this listing has been marked by ongoing concerns over the equity treatment of existing Transcorp shareholders. The historical context of Transcorp Hotels' spin-off in 2015, which left some investors feeling disenfranchised, looms over the current situation, serving as a cautionary tale for those presently holding stakes in Transcorp.
The core of the controversy lies in the absence of a clear share allocation strategy for minority shareholders in the unbundling process. Critics argue that this oversight contradicts standard practices in equity investments, where shareholders of a parent company are typically entitled to shares in the newly listed entity. This gap in the process has led to fears that the listing could disproportionately benefit a select group of major shareholders, potentially at the expense of the broader investor base.
The financial performance of Transcorp and its subsidiaries, particularly in the lead-up to and aftermath of such strategic corporate actions, has also come under scrutiny. The share prices of both Transcorp Plc and Transcorp Hotels experienced significant declines in past years, only to see a resurgence following Femi Otedola's acquisition of a substantial stake in Transcorp in April 2023. This turnaround has sparked a renewed interest in the companies' market values and strategic directions, further intensifying the spotlight on the listing of Transcorp Power.
Amid these developments, Nigerian regulators are faced with the challenge of ensuring that the listing process adheres to the principles of fairness and transparency. Shareholder groups have been quick to voice their concerns to the news media and on social media channels, advocating for measures to protect their investments and ensure equitable treatment in the listing process. These calls for regulatory intervention highlight the broader issues of corporate governance and the need for oversight mechanisms that can safeguard the interests of all market participants.
The controversy also underscores a potential trend of consolidation of control within Nigerian corporations, where strategic decisions may favor major shareholders, possibly at the detriment of minority interests. This pattern, evidenced in the concerns raised over the Transcorp Power listing, points to a need for greater transparency in corporate actions and a more inclusive approach to shareholder engagement.
Investor Trust and Long-Term Implications
The secrecy surrounding Transcorp Power's listing on the NGX has prompted concerns among analysts. The execution of the listing, coupled with the lack of day-one liquidity and the rapid timeframe, as well as unclear communication on shareholder allocation, has raised questions about fairness.
Rachael Alabi, a financial analyst and reporter at The Nigerian Inquirer, emphasized the need for regulatory bodies to intervene to ensure that the process adheres to the highest standards of fairness and transparency. "Transcorp Power's listing on the NGX has undoubtedly stirred the waters, raising valid concerns among investors regarding equity fairness and transparency," she said. "This situation is a poignant reminder of the intricate balance that must be maintained between corporate expansion strategies and the equitable treatment of shareholders."
Controversies surrounding the listing process and share allocation have raised concerns about long-term implications for investor trust in energy companies.
Adeodun Dorcas, an energy reporter with Energy News Africa Plus, sees the listing of Transcorp Power as a pivotal moment for Nigeria's energy sector.
"The listing once again underscores the need for more transparency and governance in the industry in Nigeria," she said. "This is more important today than ever."
Unfilled Bids Spark Debate on Transparency and Market Efficiency
Despite substantial interest in Transcorp Power, evidenced by a total bid of 107 million shares at the closing auction, the large quantity of unfilled bids raises concerns about overall transparency and efficiency. This situation calls for a reevaluation of the approach to ensure a fair and accessible market for stakeholders. The trading unfolded with 40 million shares exchanging hands at N264 per share, constituting a mere 0.05 percent of the total outstanding shares.
The developing saga surrounding Transcorp Power's listing on the NGX has brought to the fore critical issues such as corporate governance, transparency, and the need to safeguard minority shareholder interests within Nigeria's business ecosystem. This happens at a time when the economy is grappling with the devaluation of the naira and Nigerians are facing economic challenges.
As the dust begins to settle on the immediate uproar surrounding Transcorp Power's listing, the wider implications for Nigeria's financial market loom large. How this situation resolves could set a precedent for future listings, potentially shaping investor confidence and the regulatory landscape for years to come. The need for a balanced approach to corporate expansion, one that safeguards minority shareholder interests while promoting market growth, has never been more critical.
