Artificial Scarcity of MTN Shares Causes Tension in the NSE

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SWITZERLAND, MAY 24 – Barely one week after listing on the Nigerian Stock Exchange (NSE), there are indications that the eagerly anticipated Initial Public Offering (IPO) for shares of telecommunications giant, MTN is being deliberately delayed, to enrich current shareholders.

Although the Securities Exchange Commission (SEC) is reportedly investigating the matter, both the NSE and MTN have denied any foul play.

On May 16, 2019, NSE announced listing by introduction of 20.35 billion (20,354,513,050) ordinary shares of MTN at N90 per share. In less than a week, the share price had risen to N131 as scarcity drives up its value.

Because MTN Nigeria listed by introduction, its shares were expected to be available for trading on the day of listing, but no MTN shares had been offered for subscription by the company prior to listing.

This is why there are concerns that MTN’s shares are being manipulated with a deliberate agenda to delay the public offering so as to enrich its current shareholders. Most of the allegations are still suspicions without evidence to back them up.

Although the shares are not available for trading on the floor of the NSE, Today’s Echo gathers that they are actually being traded in negotiated cross deals.

Over the past five years, MTN has faced potential fines of up to $15 billion in Nigeria for a range of alleged misdeeds. Analysts believe the South African-based telecoms giant is using the prolonged settlement of a $2 billion tax dispute with the Federal government as an excuse to delay its IPO.

“Although it has openly denied it, we believe that the Securities Exchange Commission (SEC) is investigating this artificial scarcity, which may push the MTN shares up to twice their value by the time the IPO is finally done. Many people are not happy about it because they believe MTN’s shareholders are just trying to make themselves richer ahead of the IPO,” a source close to the NSE told Today’s Echo.

Amidst the controversy on the scarcity of MTN shares, the NSE released a statement on Tuesday, urging MTN to make its shares available so as to douse tension.

“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,” part of the statement reads.

According to the NSE, since the listing of MTN Nigeria on the exchange, a total of 105,301,759 shares valued at N12,231,997,316 have traded in three (3) days. These trades were carried out by ten (10) Dealing Member Firms in 134 cross deals/negotiated deals.

In defending itself on the matter, the NSE said:

“According to the Rulebook of The Exchange, 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.

“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 NSE said.

“MTN Nigeria Listed by Introduction.  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.” The exchange urged.

According to Investopedia, a cross trade is a practice where buy and sell orders for the same asset are offset without recording the trade on the exchange. It is an activity that is not permitted on most major exchanges.

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