In view of insinuation that would not go away, regarding alleged manipulations that is now causing artificial scarcity of shares of MTN Nigeria Communications Plc, barely three sessions after its 20.35bn shares were listed by introduction on the premium board, the Nigerian Stock Exchange (NSE), late Monday night said the telecommunications giant has not broken any rule in its book.
Continuing, it said stakeholder feedbacks have been received concerning the present rules on cross dealing and will consider the issues raised as part of “sustained efforts to ensure our market remains equitable for all stakeholders.”
It defined a cross deal as one involving “clients of the same Dealing Member Firm on both sides of a trade,” and that significant issues have been raised that Dealing Members who have not been involved in the cross deals have been unable to trade on behalf of their clients.”
The Exchange, while acknowledging the supply bottlenecks being experienced by anxious investors, said its council is also concerned about the state of affairs but urged “brokers to discuss with their clients about possible sales of shares.”
In any case, the statement argued that MTN Nigeria satisfied rules such as free-float, in the form of value, even as companies listing by introduction are not under any obligation to make their shares available. It noted that existing shareholders are at liberty to trade their shares at any price they find attractive.
There reports that MTN Nigeria shares are being actively sold off-market to desperate investors, following which the price has appreciated by 33% in just three sessions, following which its market capitalization rose to N2.437tr, up by N605.546bn, or 33.05% from N1.835tr it was listed on Thursday, May 16, 2019 (READ MORE).
The NSE’s management restated its commitment to operating a fair, orderly and transparent market, but explained that “where a company lists following an Initial Public Offering, shares are expected to be available for trading on the day of listing. In a Listing by Introduction, however, no shares have been offered for subscription by the company prior to listing.
“Thus, without any intervention, it is possible that there will be no shares available for trading on the listing date. Indeed, currently, no rule of The Exchange compels shareholders in a listed company to tender their shares for trading. Shareholders are at liberty to trade their shares at any time and price suitable to them.
“Thus, in order to stimulate trading in the shares of companies that List by Introduction, the NSE’s practice is to urge the company to make shares available on the day of listing. In the case of MTN Nigeria, the NSE had requested the Company as part of the listing process to make shares available and The Exchange expects the company to do that.”
The statement noted that since the listing of MTN Nigeria “a total of 105,301,759 shares valued at N12,231,997,316 has traded in three days” by 10 dealing member firms in 134 cross deals/negotiated deals.
The NSE noted that according to its Rulebook, “when a Dealing Member or Authorized Clerk has an order to buy and an order to sell the same security at the same price, the Dealing Member or Authorized Clerk may “cross” those orders at a price at or within The Exchange’s best bid or offer.
“A variant of this is the negotiated deal, which describes a situation where a cross-deal is executed between two Dealing Member Firms at a price which may be within The Exchange’s best bid or offer or with the approval of The Exchange, outside the best bid or offer.
NSE management said no concession was given to MTN Nigeria on the minimum free float required for companies listed on The Exchange, noting that in its Rulebook, “free float is defined as the number of shares that an Issuer has outstanding and available to be traded on The Exchange. It includes all shares held by the investing public, and excludes shares held directly or indirectly by promoters, directors and their close relatives; strategic investors holding five percent and above of the issued share capital; or government.”
Rules for listing on the Premium Board, as MTN Nigeria did, he continued, “require a Company to have a minimum free float of twenty percent of its issued share capital or that the value of its free float is equal to or above N40 billion on the date The Exchange receives the Issuer’s application to list. MTN Nigeria met with the free float requirement of N40bn. The free float of MTN at the time of listing was in excess of N90bn.”