Regulator, stockbrokers differ on MTN free float share-listing

•As stockbrokers suspect manipulation
Capital market regulators have been accused of conniving with MTN Nigeria Plc to allegedly manipulate the performance of the telecom firm’s share price at the Exchange.

Specifically, they argued that by allowing MTN a free float of only 5.542 million shares admitted for trading at N90/share worth N498 million on Thursday, when it listed by way of introduction on The Nigerian Stock Exchange (NSE), rather than unbundling all the units of shares in its holding, the managers may have unwittingly created a scarcity situation in the market.

Under the terms, “The free float requirement for companies on the Alternative Securities Market, ASEM, Board is 15 per cent of market capitalisation while 20 percent is prescribed for companies listed on the Main Board and also Premium Board is 20 per cent of market capitalisation or above N40 billion on the date the Exchange receives the Issuer’s application to list.”

Besides, the Rule for listing by introduction has a proviso that: “The Exchange will from time to time determine the market capitalisation and free float requirement.”

Stockbrokers noted that due to the scarcity created by the number of shares available, MTN shares have already gained 21 per cent in just two trading sessions; from the N90/share it opened with on Thursday, to the N108.90/share at Friday close.

But the NSE, absolved itself of any wrongdoing, Sunday night, saying in an email response to The Guardian that MTN more than met the stipulated requirements for listing.

Head, Listings Regulation, NSE, Godstime Iwenekhai, explained that: “The total number of MTN shares in the hands of over 700 Nigerians who are not promoters, controlling interests, directors, etc that were unbundled upon listing is about 1.8 billion. When you convert this at the listing price of N90 per share, this translates to about N162billion which is more than the N40billion free float requirements for companies on the Premium Board.”
He further clarified that the “Free float refers to the portion of shares of a company that are in the hands of public investors as opposed to locked-in stock held by promoters, controlling-interest investors, or governments.”

The apex regulator; the Securities and Exchange Commission (SEC), when contact on the anomaly did not offer any new response on the development but rather referred the public to an initial statement made on MTN listing.
“The Securities and Exchange Commission, SEC can confirm that the application by MTN Nigeria to register their existing securities has been approved.

According to Acting Director General of SEC, Ms. Mary Uduk: “MTN sought to come to the market by way of an introduction and they wrote to the SEC last week requesting for approval to register its existing shares. That approval has now been granted.”

Notwithstanding the NSE’s response, analysts believe that because MTN investors lost value because of the Central Bank of Nigeria (CBN) fine last year, this listing by introduction is designed to create a “value recovery” situation for them and pave the way for them to sell off their shares, after driving the price to the desired level.

Specifically, the Chief Research Officer, Investdata Consulting Limited, Ambrose Omodion, said: “Yes, the regulators claim to be protecting retail investors or encouraging their participation in this market are just paying lips service, because the shareholding structure of MTN Nigeria that holds the 23.92% are institutional and high net-worth individual investors that are using the Exchange to enrich themselves at the expense of retail investors that also want to be part-owners of the company.

“The 20% minimum free float is one of the listing requirements, but it seems to be a post-listing requirement since these companies are listed and given date to meet the minimum free float.

“With the tight holding structure and small float of MTN Nigeria, the existing shareholders of the company are making it difficult for new shareholders to buy. The high demand is currently causing problem at the Exchange because local potential shareholders would definitely buy the shares at a very high rate.

“ As we speak, seven banks had approved #200 billion loan facilities for MTN, which is not bad depending on what the company wants to achieve with that loan, coming two days after the listing. Does it mean that becoming a quoted company in Nigeria is one of the conditions to grant the facility? The urgent and speed at which the regulators approved the listing was something else.”

Similarly, another top stockbroker told The Guardian in confidence that: “The much-awaited listing of MTN Nigeria ended in anticlimax. On the day it was listed, no unit was released to the market. That caused a serious uproar. It is also suspected that most of the trading that subsequently occurred was cross deals that did not involve release to open the market. MTN has not met the minimum float to the investing public, hence their promise to do IPO very soon.”

Another stockbroker, who also spoke on the condition of anonymity said: “Yes, the original intention of MTN listing was to make the shares available for Nigerians. But they brought it, made the cross deal and crossed it to themselves, which is not right. Up till now, not even a unit is available for trading. Why listing the shares in the first place?

“They want to enjoy the price appreciation alone. The shareholders are holding the shares and waiting for it to appreciate to a certain level before they offload, which is not right. There are too many controversies, but it is just that it is already listed. They must make it available.”

Consequently, market operators also accused MTN Nigeria of deviating from their initial plan to encourage Nigerians to partake in their wealth creation process through the listing, as no single unit has been made available to stockbrokers to sell to their clients, who have been looking forward to investing in the MTN shares.