Fear of more companies delisting from the Nigerian Stock Exchange (NSE) has gripped some investors following moves by companies to exit the Exchange.
A total of 77 companies have been delisted from the NSE in the past 10 years and seven of them exited last year.
THISDAY checks revealed that more are planning to delist due to the challenging operating environment, which has made coping with post- listing requirements difficult to comply with.
Consequently, some of the companies are considering exiting so as to remain ordinary private limited liabilities companies.
A shareholder, who spoke to THISDAY on this development, confirmed that already more companies were planning to buy out the minority investors preparatory to delisting.
A.G Leventis Nigeria Plc, and Continental Reinsurance Plc had used that strategy to exit the exchange.
Before then, Nigerian Bottling Company Plc, Seven-Up Bottling Company Plc among others adopted same method.
Now, Union Diagnostic and Clinical Services Plc, a company that was listed in 2007, has notified the NSE of move to buy out minority shareholders.
Union Diagnostic and Clinical Services Plc, is a leading indigenous and homegrown company in the medical diagnostics and healthcare sector owned by over 10 thousand Nigerian shareholders and has been offering full and comprehensive services in diagnostic medicine since 1994.
However, the company said it had received an offer from Cedar Advisory Partners Limited to acquire a total of 1,407,855,051ordinary shares of 50 kobo each held by all minority shareholders, representing 39.62 per cent of the company at an offer price of N0.35 per share through a Scheme of Arrangement.
Cedar currently holds 711,916,612 ordinary shares representing 20.04 per cent equity holding in the company.
At the end of the transaction, Cedar will hold a combined 59.66 per cent. Based on this development, the company advised shareholders and potential investors to exercise caution when dealing in shares until a further announcement is made.
According to a shareholder activist, Mr. Moses Igbrude, considering past experience, Union Diagnostic and Clinical Services Plc, may be on its way out of the NSE.
“We have witnessed the situation many times before and I am very sure after buying out the minority shareholders, the next thing will be to delist from the NSE. In fact, my worry is that more firms may take similar route because the operating environment is not helping matters.
“Most of the companies are struggling to survive and paying dividends to shareholders and complying with post-listing requirements are additional burden. Hence, some of the companies are delisting,” Igbrude, who is a member of the Independent Shareholders Association of Nigeria (ISAN) said.
According to him, there is nothing wrong with delisting, noting that the most important thing is for regulatory authorities to protect the interest of investors whenever companies delist.
Also, the Chairman, Ibadan Zone of Shareholders Association of Nigeria, Mr. Eric Akinduro, said companies are now using the buy-out of minority shareholders strategy to deny investors their rights. According to him, what the companies are paying shareholders is mostly based current market value of the shares without considering the reserves and goodwill accumulated over the years.
He said the regulators should do more to protect the investors who are victims of the ploy by companies to “strip the shareholders off their rights.”
“Likewise the shareholders should come together to have a common voice to protect our rights otherwise before we know it virtually all the good companies will disappear with payment of stipend to shareholders.
“It is a process that must be vehemently opposed and if it will be allowed at all, the interest of all must be considered,” Akinduro said.
The Chief Executive Officer of the NSE, Mr. Oscar Onyema, had maintained that the Exchange cannot stop any company from delisting.
According to him, the priority was to make listing on the Exchange attractive for companies and at the same time assist them to remain listed so as to meet their funding needs.
Onyema, disclosed that the NSE has worked very well concerning compliance by listed companies.
“Generally, we have revamped compliance framework since 2011 and we have focused on a number of things consistent with international standards. The first thing is transparency.
“If you look at the reports we put out on our website, it shows you the compliance status of companies that we have issued fines to and have not met their reporting timelines, companies that have one deficiency or another.
“Secondly, we introduced the companies’ status indicator symbols, an eleven symbols that show companies below the listing standards, even on the ticket tape it is almost like a buyers’ beware, stating that the company is below listing standard as you try to make a decision concerning buying the stocks of that particular company,” he had said.
The NSE boss added that the exchange had been engaging companies on the their challenges with a view to proffering solutions and make them remain listed.