The spate at which companies listed on the Nigerian Stock Exchange (NSE) opt to voluntarily exit the Exchange is now a source of concern, particularly at a time when the bourse is in need of new listings.
A company’s name ceases to exist on the Daily Official List of the Nigerian Stock Exchange due to decisions that are most times voluntary, regulatory or as a result of Mergers & Acquisitions (M&As).
The term “delisting” of securities means removal of listed securities from the Exchange. The securities of an affected Issuer will no longer be traded on the Exchange and the Issuer’s name will be removed from the Daily Official List of the Exchange.
BusinessDay recent check shows that from 2002 to 2018, no fewer than 17 companies earlier listed on the NSE chose to voluntarily delist. This is in addition to many others that were regulatory-induced or due to their M&A consummation.
Our check shows that 13 out of the total companies that voluntarily delisted, representing 76.4 percent, voluntarily chose to be delisted from the Daily Official List of the Exchange between 2011 and 2018.
“Delisting tends to reduce the universe of liquid shares, thereby affecting the depth and breadth of the stock market, especially if there are no new listings,” Douglas Muyeche, a finance lecturer at the National University of Science and Technology, Bulawayo, Zimbabwe, said in a recent note.
“Inasmuch as most delisting(s) are involuntary, there are good reasons for a counter to opt for voluntary delisting in light of enhancing shareholder value. The cost of remaining public versus the cost of going private has been cited as the most determinant factor in voluntary delisting,” Muyeche said.
Another notable reason he gave for companies’ voluntary delisting is the inability to raise equity capital by the listed firm, “owing to a relatively lower share price compared to the real net asset value of the firm”.
“The need to merge, demerge or restructure a firm may be drivers of voluntary delisting,” he said.
Oscar Onyema, CEO, NSE, assumed office on April 4, 2011. He will today, Monday, January 14, 2019 lead other management staff of the Exchange to present the 2018 market recap and 2019 outlook.
Voluntary delisting is the withdrawal of an Issuer’s securities listed on the Exchange with the express approval of the holders of its securities, after complying with relevant requirements in that regard.
It is different from regulatory delisting which refers to the removal by the Exchange of an Issuer’s securities for non-compliance with the Listings Rules of the Exchange or for breach of the terms and conditions of the General Undertaking executed by the Issuer when its securities were listed by the Exchange.
The number of listed companies on the Exchange has decreased from 2013 high of 189 to 164 as shown in the NSE third-quarter (Q3) 2018 Fact Sheet.
The voluntarily delisted companies and the year they exited the Daily Official Lists include Impresit Bakolori Plc (2002), CFOA Nigeria Plc (2007), Nigerian Textile Mills Plc (2008), and Incar Plc (2010).
In 2011, Nigerian Bottling Company Plc, Nampak Plc, and United Nigeria Textile Plc chose to delist from the NSE.
In 2014, Big Treat plc, Afroil plc, Starcomms plc, Pinnacle Point Group, and Poly Products plc took the same decision and delisted voluntarily from the Nigerian bourse.
On January 16, 2015, Cappa and D’alberto joined the league, followed by Ashakacem Plc and Avon Crown Caps and Containers Plc on July 4, 2017 and September 18, 2017, respectively.
Seven-Up Bottling Company plc voluntarily exited the stock market on March 5, 2018, while on August 17, 2018, Paints and Coatings Manufacturers Nigeria plc took same decision.
In keeping with its objective of taking a vigorous and adaptive approach to strategy execution, the NSE had last year reassessed its strategic agenda in light of changing dynamics in both the operating environment and the global exchange landscape against the backdrop of the fourth industrial revolution. This culminated in a new corporate strategy for the 2018-2021 period. In redefining its strategic ambitions, the NSE selected three key focus areas to pursue to enhance its global competitiveness and appeal to stakeholders. They are based on satisfying its customers, boosting retail segment penetration, and enhancing its organisational agility.
Voluntary delisting process at the NSE requires directors to meet and pass resolution to delist the company. It also involves resolution for delisting proposed for approval of shareholders at Annual General Meeting/Extraordinary General Meeting (EGM); submission of draft notice containing proposed resolution to the Exchange for vetting and approval; publication in at least two national dailies at least 21 days before the AGM/EGM; and the NSE to be represented at the AGM/EGM to observe proceedings.
Simple majority of members present in person or by proxy is required to approve voluntary delisting of a company; the majority shareholder/core investor must set aside sufficient funds to pay off any shareholder who does not want to remain a member of the company in its unlisted status; funds must be kept with a custodian acceptable to the Exchange (example is the Central Securities Clearing System (CSCS); and price at which unwilling shareholders are bought should not be less than the highest price at which the company traded in the six months preceding the date of the AGM/EGM where the resolution to delist was passed.
