The Nigerian Stock Exchange (NSE) on Tuesday delisted one of Nigeria’s oldest companies-UTC Plc and three other companies-Beco Petroleum Plc, MTECH Communications Plc and Mass Telecommunication Innovation (MTI) Plc over poor compliance with post-listing requirements.
The shares of the four companies were delisted and their names removed from the official list of the Exchange on Tuesday, after the council of the Exchange gave the final approval for the delisting.
Authorities at the Exchange stated that they acted pursuant to clause 15 of the General Undertaking, Appendix III of the Rule Book of The Exchange, 2015 (Issuers’ Rules), which sets out requirements for continuing listing on the Exchange. The quotations committee of the national council of the Exchange, which oversees listing at the stock market, had approved the delisting on February 24, 2017.
Altogether, the Exchange delisted 14.81 billion ordinary shares of 50 kobo each valued at N9.45 billion, being the total outstanding shares and market values of the four companies. At the point of delisting, UTC had 1.23 billion shares valued at N616.69 million. MTECH had the largest shares of 4.97 billion shares valued at N4.52 billion. MTI had 4.89 billion shares worth N2.45 billion while Beco Petroleum had issued 3.72 billion shares worth N1.86 billion.
The companies were delisted under the compulsory delisting window of the Exchange, which is a weeding out process usually initiated and undertaken by management of a stock exchange to remove companies adjudged to be irredeemably deficient in corporate governance from its trading platform.
Compulsory delisting is usually the final step in a long process of engagement including demand for compliance reports, issuance of warnings, imposition of fines and sanctions and issuance of notice of delisting. Where a company fails to restructure and adjust its operations to enable it meet post-listing requirements, then the Exchange may indicate delisting process.
The NSE had since 2014 issued a three-month notice of compulsory delisting to the four companies for various corporate governance and post-listing failures, especially non-release of financial reports and accounts for several years.
A source at the Exchange said the four companies were delisted to safeguard the integrity of the market and protect investors from buying shares without fundamentals.
The source indicated that the four companies had failed consistently to submit their operational reports and periodic corporate earnings to the NSE as required by the post-listing rules of the Exchange.
The four companies had earlier filed for and received approvals from the Exchange to restructure their operations to meet the minimum corporate governance standards but failed to pull through with the restructurings.
UTC started business in Nigeria in 1932 and became a private limited liability company in 1969. It converted to a public company in 1971 and its shares were listed on the NSE in 1972. After a chequered history as a conglomerate for more than seven decades, it had restructured its operations to focus on the food business in board of the company hailed as a new dawn. The delisting on Tuesday marked an inglorious exit to nearly five decades of public quotation.
MTI, a company incorporated in December 2001, had been embroiled in allegations of financial mismanagement. A January-2014 petition to Securities and Exchange Commission (SEC) by some investors had alleged massive financial and securities fraud at the telecommunication infrastructure company. The petitioners had alleged that former directors of the telecommunication infrastructure company engaged in fraudulent practices and mismanaged the finances of the company.
The petition, submitted on behalf of the aggrieved shareholders by the law firm of Punuka Attorneys and Solicitors was titled “Petition Against Five Former Directors Of Mass Telecommunication Innovation Plc (MTI Plc) Unlawful Distribution and Utilization of the Company’s Funds Raised from the Capital Market”.
According to the petitioners, five former directors of the company misappropriated funds raised through the private placement and made erroneous and misleading statements to hoodwink the public.
The petition stated that MTI had between March and April 2008, after obtaining the consent of the SEC, undertaken a private placement to raise funds for the purpose of implementing its business development and expansion programme, improvement in information technology infrastructure, staff development and working capital as stated in the offer document.
According to the petitioners, the sum of N5.2 billion was raised by way of private placement and the company was converted to a public limited liability company and its shares were listed on the floor of the NSE after a successful private placement.
However, the aggrieved investors alleged that as soon as the funds were released to the board and management, they immediately paid themselves what they tagged “severance pay.”
They alleged that each of the five directors took the sum of N55 million amounting to a total of N275 million but all the directors, including the non-executive directors, still remained on the board after collecting the severance pay.
They alleged that just one year after the proceeds of the private placement were received, the company was unable to pay salaries and pay for the execution of existing contracts.
“All the directors continued to collect salaries and allowances. Non-executive directors were not entitled to salaries. Payment of the severance pay was illegal as it ran contrary to the provisions of the law and the procedure stipulated,” the petitioners stated.
They also alleged that the directors might have fraudulently misdirected the investing public through overstatements and understatements of the financial conditions of the company during the issue period.
According to the petitioners, the financial details in the prospectus for the private placement were manipulated to deceive the investing public as the company has had to write off over N1 billion of overstated debts.