In 18 years, the number of companies listed on the Nigerian Stock Exchange has reduced by 101. Capital market stakeholders highlight the reasons and the way forward in reversing the trend. OLUSHOLA BELLO reports.
Despite a free entry and exit for companies listed on the Nigerian Stock Exchange, the huge numbers of delisted companies witnessed in the last 18 years have called for fresh measures aimed at deepening the market, promoting more listing, and encouraging companies to stay listed on the nation’s bourse.
Delisting is the removal of a security from the official list of a stock exchange on which the company trades. Companies may be delisted on regulatory instruction, chose to delist voluntarily, on merger and acquisition.
Under a voluntary delisting window, a quoted company can decide to delist from the Exchange due to reasons such as merger/acquisition. On the other hand, the NSE can compulsorily delist a firm when it fails to meet up with post-quotation standards.
Why companies delist
Companies are delisted for recurring and possibly irredeemable inability to comply with the listing requirements of the stock exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues. Once delisted the security ceases to be traded on the exchange.
Also, companies are delisted for free float deficiencies, a major infraction that may adversely affect the liquidity of its shares. The free float, otherwise known as public float, refers to the number of shares of a quoted company held by ordinary shareholders other than those directly or indirectly held by its parent, subsidiary or associated companies, directors of the entity and their close family members and any single individual or institutional shareholder holding a statutorily significant stake, which is five percent and above in Nigeria.
Companies listed on the stock exchange are required to maintain a minimum free float for the set standards under which they are listed in order to ensure that there is an orderly and liquid market for their securities.
Companies delists on NSE
According to the report on NSE, 101 companies were delisted on NSE from 2002 to January, 2019. A review of the list showed that 18 of the companies chose to delist voluntarily; 72 delisted due to regulatory instruction; while 11 of the companies delisted due to reforms/expansion within the sectors they operated.
Companies delisted voluntarily include; Impresit Bakalori, CFAO Nigeria, Nigerian Textile Mills, Nigerian Bottling Company (NBC), United Nigeria Textile, Nampak, United Nigeria Textile, Big Treat, Afrioil, Starcomms, Pinnacle Point, Poly Products, Cappa and D’Alberto, Ashaka Cement, Avon Crown Caps and Containers, Seven Up Bottling Company, Paints & Coating Manufacturers Nigeria and most recently Great Nigeria Insurance.
Meanwhile, some other companies delisted based on regulatory violations.
Checks conducted by LEADERSHIP revealed that most of the companies delisted voluntarily from the bourse had cited harsh economic climate and parent company buy-out as reasons.
Chief executive officer of NSE, Oscar Onyema, said recently that companies in their life cycle would be listed, while others would be delisted over time.
“Companies will delist for different reasons from voluntary to regulatory delisting, mergers and acquisitions and other things that would cause them to delist,” he said.
“Our job is to make sure that we make it easy for companies to come in and if they want to leave, that they leave in an orderly manner. So, what we have tried to do with our listing rules in the last one to two years is that we have tried to enhance the rules to ensure that companies behave in an orderly fashion,” he said.
The managing director of Highcap Securities Limited, Mr. David Adonri, said there is free entry and free exit from the capital market by publicly quoted companies. Adonri, however, said that delisting is not a good omen for the capital market, which is already adjudged to be shallow.
He also noted 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.
The former president, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said that most of the equities were delisted due to their irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
Acting director-general of Securities and Exchange Commission (SEC), Mary Uduk, has set out plans to check the debilitating the trend of delisting.
Apart from putting a stop to excessive delisting of companies, Uduk said SEC will go the extra mile to see an improved listing of multinational companies in Nigeria on the capital market.
She noted that increase in delisting by public companies pose a threat to the market in view of the fact that quite a number of them are highly capitalised.
Also, chief operating officer of InvestData Consulting Limited, Ambrose Omordion said that it is highly important for companies to comply with the post-listing requirements of the NSE, and all other regulations guiding the capital market.
That is the only way to ensure that shareholders’ investments are safeguarded. He stated that in its determination to achieve a world-class capital market and guarantee investor confidence, the NSE has undertaken steps to penalize erring quoted companies who fail to adhere to its listing stipulations; including prompt disclosure.
In the same vein, a stockbroker with Calyxt Securities Limited, Mr. Tunde Oyediran, said the stock market was a barometer that gauges the mood of the economy. He said the Nigerian stock market was established to serve as long term investment outlet and platform for raising long term capital by fund users.
Oyediran added that the market has achieved these objective to a modest extent. If the economy is to adequately create wealth and generate productive employment, more is expected from the Nigeria’s capital market.
According to him, raising fresh capital requires investors’ willingness to buy shares, and that quoted companies had to exercise caution in order not to risk under-subscription.
In order to avoid future reoccurrence, Abe urged investors to change their investment strategies and avoid falling victims of circumstances in cases where some quoted companies are delisted from the market.
Also, NSE considered in reviewing the rules of free float to ensure that companies comply with the post listing requirement and avoid being delisted from the Exchange.
Delisting of stocks on the NSE hurts the firms being delisted, harms the investors holding those shares, removes from the exchange or stock market a security that traders wish to transact and also reduced the numbers of companies listed on the Exchange. For the NSE to be the barometer of the economy, it has to have a wide number of healthy listed companies from all sectors of the economy.
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