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New offers, listings on NSE unlikely now – Experts

By on February 22, 2015

The poor start made to the year by the stock market is a major deterrent to companies considering listing on the Nigerian Stock Exchange or raising funds through rights issue, it has been gathered.

According to experts, such plans are unlikely till the third and fourth quarters of the year when there is a clearer picture about the economy.

Having closed 2014 with a negative return of 16.14 per cent, the NSE has continued to be battered by economic challenges caused by the slump in oil prices, the declining value of the naira and uncertainty about the general elections.

Analysts said the exit of foreign investors from the market, as a result of the uncertainties and the challenges faced by the companies that have tried to raise equity capital this year, had discouraged other companies, dealing a blow to the drive to get more companies listed on the Exchange.

The Chief Executive Officer, Enterprise Stockbrokers, Mr. Rotimi Fakayejo, said the experience of companies had not been good.

He said, “Transcorp Hotels came last year (with an Initial Public Offer), but it wasn’t a success. It was about 54 to 55 per cent subscribed. We have seen United Bank for Africa hoping to come out with a rights issue at N6, but when they saw that it couldn’t fly they came at N4. We have seen Access Bank; they initially came out with their rights issue at N8.90, but at the end of the day they had to slash their price to N6.90.

“We have also seen Oando Plc in the market. While their offer was going on, it was slashed from N22 to about N18.

“That is not a good story at all. It implies that there is that fear that the rights by the companies would not have been successful if they had gone ahead with the initial price. Even with the price being offered for those rights now there is no assurance that the offers would be successful.”

According to him, until the current challenges in the economy are resolved and there is greater political stability, it will be tough for any company to come to the market.

“I think, this year, we will not see many offers. Any offer that will have any measure of success may have to wait till the last quarter of the year,” he said.

After shedding eight per cent last week with the NSE All-Share Index posting a year-to-date return above 20 per cent negative at the end of the week, equities rallied this week to recover a major chunk of the losses.

As of Thursday, the NSE ASI stood at 15.51 per cent negative, owing to the rally.

The CEO, Highcap Securities Limited, Mr. David Adonri, however, explained that the rally was driven by corporate earnings and the fact that the market had already reacted to the poll delay.

He said, “The equities market has already reacted proactively to recent macro-economic crisis and political development. Recovery in the market is now being propelled by full-year corporate actions, together with positive development in the war against Boko Haram.”

However, with earnings expected to be mixed and the value of the naira still declining, the market is not expected to rebound until the third quarter of the year.

The President, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, recently advised companies to put all equity capital raising plans on hold for now.

“Any company thinking of coming to the market to raise more capital now should forget about it until after the elections. Let’s watch and see what will happen,” he told our correspondent.

Adonri, while commenting on the fate of companies seeking additional capital, had said, “We have a situation where foreign investors are pulling out of the market. So, except they are able to identify specific foreign investors, who may be taking long-term positions in the banks, this is not the appropriate time for any issuer to come to the market to raise funds.”

 

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