In the financial markets today corporate governance, trust and confidence are key factors that drive the share prices of quoted and unquoted companies on the different trading platforms across the globe.
Management performance at every level is assessed by the company’s earnings, also known as result or scorecard, but the trust and confidence (which are intangible but essential assets) of the investing community in a company are a function of good corporate governance that creates value for that particularly firm and its shareholders at the end of the day.
It is clear today that Nigerian investors have lost confidence and trust in many companies with shares traded on the Nigerian Stock Exchange (NSE) particularly, due to their often inconsistent and distorted corporate disclosures that have led to heavy value depletion for their shareholders. These companies often begin with posting robust quarterly and full-year profit that keep their share price cruising north, and then there is a huge loss that will send the share to the south as its price adjusts to the emerging reality.
While many had in the past hoped that these companies will turn-around soon and then begin to put smiles on the faces of their loyal shareholders, they have consistently been buffeted for five straight years with worsening numbers capable of inspiring despair, rather than hope for a brighter tomorrow. This means such shareholders have gone without any form of reward, even while the boards and management of the same companies never fail to earn their salaries, allowances and even bonuses, while maintaining their luxury lifestyles during the same period.
These managements are however unremorseful and quick to release red numbers to investors. Some engage in asset stripping, which is a wonderful way to dispose of plants, machineries and others deemed surplus to the company’s need. Under such circumstances, there is need for these companies to let the investing public know whether the disposed asset were at a profit or loss, by providing necessary information about the assets in their reports or press statements, rather than keeping investors in the dark and guessing.
There companies also that are good in informing investors when signing one Memorandum of Understanding (MoU) or the other with local and foreign partners and investors, but have not demonstrated enough capacity to manage their current position effectively and efficiently. Such companies pile up debts thereby keeping the share prices of many even with good prospects low, such that they perpetually remain penny, or even junk stocks.
In the investment world, the first attraction of any company is its share price and whether it is undervalued or overvalued, because this speaks of the quality of the management, products, services, value created so far for its stakeholders and the consistency of its delivery, all of which are reflected in the stock price.
In the midst of these however, particularly in recent times, many companies in Nigeria have won the confidence of the investing public through regular filing of their earnings reports and consistent rewards to shareholders.
One example that have earned investor confidence and respect is United Capital Plc, which despite being relatively new on the exchange, has remained regular in making its earnings reports available to the market while regularly improving on its returns to stakeholders on the strength of strong numbers that have supported its payout for the last three year.
Eterna Oil has become the most improved company in its sector, years after suffering huge price declines due to poor results, irregular release of its numbers and subsidy scam among others. The company now is gradually becoming the toast of investors due to its regular release of numbers, payment of dividend in recent times and the strong numbers being released in recent times. Add these to the good news that it is among 18 Nigerian companies selected last week to lift crude by the Nigerian National Petroleum Company (NNPC), a situation expected to greatly boost revenue and profit in the course of this year.
Meanwhile, the perception is that the same trust and confidence issues have kept the share prices of companies like Oando in the oil sector, those in the healthcare sector, and many insurance companies with otherwise good prospects low, a situation that has been worsened by their unimpressive numbers that no longer surprise investors and traders.