The last 15 years have seen an increasing number of firms delisted from Nigerian Stock Exchange (NSE). Specifically, analysis of the data on the stock exchange website showed that about 90 companies have delisted from the nation’s bourse in the last 15 years.
The firms were said to have left the market for various reasons ranging from voluntary, regulatory directive, to mergers or acquisitions.
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.
On the other hand, Regulatory delisting 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.
Available records show that 13 out of the 90 companies opted for voluntary delisting while 77 others were induced regulatory delisting.
Companies delisted voluntarily include; CFAO Nigeria Plc, Impresit Bakalori Plc, Nigerian Textile Mills Plc, Nigerian Bottling Company (NBC) Plc, United Nigeria Textile Plc, Nampak Plc, United Nigeria Textile Plc, Big Treat Plc, Afrioil Plc, Starcomms Plc, Pinnacle Point, Poly Products, Cappa and D’Alberto and most recently Ashaka cement.
Some of the companies delisted based on regulatory violations include Dumez Nigeria, Atlas Nigeria, Ceramics, Beverages Nigeria Enpee, Tate Industries, Maureen Laboratory, Rietzcot Nigeria, Intra Motors Nigeria, Grommac Industries, Onwuka Hi-Tek, Nigerian Lamps, Nigerian Yeast & Alcahol, Security Associate, Footwear, Ferdinand Oil Mills, Christlieb, BCN, Liz-Olofin & Companies, Oluwa Glass, Asaba Textile Mills, Aboseldehyde Labouratory, Epic Dynamic, Fadmad, Afprint, Nigercem, Daily Times, Albarka Airline, Foremost Dairies ,Wiggins Teape Nigeria ,Okitipupa Oil Palm, First Capital Investment & Trust, Flexible Packaging, Newpak, Krabo Nigeria, Tropical Petroleum, Nigerian Bottling Company, Nampak, Abplast, Udeofosin Garment, Hallmark Paper Product, West African Aluminium, Nigerian Wire Industry, IPWA, G. Cappa, West African Glass Industries, Investment & Allied Insurance, Alumaco, Jos International Breweries, Adswitch, Rokanna, Lennards (Nigeria), P.S Mandrides & Company, Premier Breweries, Costain, Navitus Energy and Nigerian Ropes Plc.
However, fresh anxiety heightened recently among stakeholders as more companies move to exit following a renewed move by their owners to delist from the NSE.
The NSE disclosed that two firms, Paints and Coatings Manufacturers Nigeria Plc, and Avon Crowncaps & Containers Nigeria Plc have applied to exit the Exchange.
Both companies have entered scheme of arrangements with their respective shareholders that would lead to the delisting of the entire shares of the companies from the NSE.
Daily Sun gathered that more firms may follow since most of them are finding it highly challenging to meet the post-listing obligations.
The Chief Executive Officer of Cowry Assets Limited, Mr. Johnson Chukwu explained that some of the companies have realised that one of the major reasons for listing, which is access to equity capital, is not forthcoming due to investor apathy amidst the current economic realities. “Take for instance the issue of Coca-Cola that delisted.
One of the reasons for its delisting was that they could no longer borrow locally because the cost of borrowing locally were quite high. Ideally, a listed company should be able to access funding even in the debt market at a lower rate but when the cost of borrowing becomes exhorbitant and you don’t even enjoy the benefit of listing, companies may not see any need to list or to remain listed.”
Chukwu also said, “Secondly, equity prices in 2008 came down drastically so the valuation of companies that were listed, particularly the international companies became lower than the intrinsic value. So, in effect the present companies wanted to consolidate their local investment in Nigeria the values had to be adjusted to make position for losses because valuations based on market value were below the metaphase of some of those companies whom the parent companies had invested in, so such parent companies would ordinarily not see the need to sustain the listing because without listing, carrying investment will be less costly but when they are listed, they have to carry at market value and some instances those market value at some point were below the cost of investment, so that was creating a challenge for cost of multinationals listed on the Exchange, that will explain why many of them delisted.”
To corroborate with the Asset Cowry boss explanation, only recently, Ashaka Cement Plc voluntarily delisted from NSE for violation of the exchange free float deficiency provision of 20 per cent.
The company announced its voluntary withdrawal in a statement posted on NSE website by the company’s directors.
“The Board of Directors of Ashaka Cement Plc has opted for a voluntarily delisting of the company from the NSE in violation of the Exchange’s Free Float Deficiency provision of 20 per cent,” the statement read in part.
It stated that Lafarge Africa Plc currently holds 84.97 per cent of Ashaka Cement, bringing the free float that was tradable on the NSE to 15.03 per cent. This is against the 20 per cent stipulated by the Exchange.
The company opted for voluntary delist to avoid NSE enforcement action of regulatory delisting because the free float deficiency was not likely to be remedied. It had decided to operate as an unlisted entity.
“Besides the free float deficiency, the directors said over the last five years, there has been little or no trading activity with only 0.20 per cent of the shares held by the minority shareholders being traded.
“Neither the company nor any shareholders are benefiting from the continued listing as shareholders are not getting any exit opportunity. “And their investments have been locked up while they find it difficult to dispose of their shareholding.
“Moreover, the company is bearing unnecessary cost in complying with its listing obligations,” the directors stated.
Through the voluntary delisting of AshakaCem, they are exercising a regulatory provision that will shield the company from any enforcement action that the NSE may effect.