September 29, 2008 4449 VIEWS
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Certified Public Accountants

1210 Hyde Park Avenue Hyde Park, MA 02136, USA

Phone: (617) 333-9754■ Fax: (617) 333-9758




September 19, 2008


Prof. Ndi Okereke-Onyiuke

Director General Nigeria Stock Exchange

2/4 Custom House, P. O. Box 2457

Lagos, Nigeria




Dear Mrs. Okereke-Onyiuke,


Thanks for the opportunity you accorded me to discuss my concerns regarding the recent share reconstruction carried out by Sterling Bank Plc., which left a sour taste in the mouth of its shareholders.


Before I proceed, I will like to introduce myself to you. My name is Raphael C. Okoye, a Nigerian citizen residing in Boston, United States. I grew up in Nigeria and received my education in Nigeria before I moved to the United States. In the United States, I own a public accounting firm (chartered accounting) in Boston and I actively practice public accounting including audit, tax, accounting, consulting and investment services.


Based on my financial background, I actively invest in the US stock market. Last year I was convinced by a friend to invest in the Nigeria stock market, especially when the banks are big and strong and there is a general sense of sanity and stability in the financial market. Within seven months, I invested heavily in the stock market, with a strong conviction that Nigerians abroad should contribute towards the economic and financial development of the Nigeria stock market. I campaigned and convinced many highly educated Nigerians in Boston to invest in the Nigeria stock market. In 2007, I invited a well respected director of a security brokerage firm in Nigeria, who is also a dealing member of the Nigerian Stock Exchange for a workshop in my office in Boston. This is an attempt to woo and encourage fellow Nigerians in Boston to invest and participate in developing our equity market.


As part of my investment strategy, I acquired various lots of Sterling Bank Plc at various prices totaling 500,000 shares. I acquired about 50,000 shares at N10.27 and other 450,000 shares from N7.28 to N8.50. Few months ago, the stock was placed on technical suspension for the purpose of a reconstruction.


My understanding was that it was going to be a reverse split, similar to what was done by International Energy Insurance at the beginning of this year. In that situation, the reconstruction led to proportional reduction in the share holdings of investors and increase in the price of the share. That is OK and there is nothing wrong about this type of reconstruction. However, in the case of Sterling Bank Plc, I understand that there is a reduction in share holding for all shareholders and simultaneous reduction in price. After the reconstruction, the share was listed at about N5.65 and currently trading at N5.75.


There was general confusion about this transaction and most of the shareholders did not know how the allocation was done; the purpose of the reconstruction and how many new shares were allocated to each shareholder. I spent three days researching various newspapers, websites and internet chartrooms to obtain information, which should be made readily available to me as a shareholder. Such corporate action should be a required communication to all shareholders of the bank.


I confirmed from “”, an online forum for Nigerian investors that the allocation ratio for the new shares is 10 new shares for every 19 shares held. That means that I have 263,137 new shares after the reconstruction and the price of the stock was also slashed.


The allocation was confirmed this morning, when I received my CSCS statement from my broker. How can I explain this kangaroo arithmetic to my family? My patriotism has subjected me to a financial suicide in the Nigeria stock market?


This is another discourteous “419” financial guerrilla warfare and terrorism, hatched in a corporate boardroom and carried out by inconsiderate, fraudulent and incompetent directors. It has the face and complexion of an illegal transaction, which should not be authorized under the laws.


I urge and implore you to visit the above online forum to see the damage and harm the management of Sterling bank has done to innocent and unsuspecting shareholders. The ultimate effect of this type of corporate action is total disenchantment of the investing public and permanent impairment of the credibility of the Nigeria stock market and that of its management, policy makers and operators.


How can foreign investors tolerate or survive this kind of act? This is very absurd! I feel very angry, saddened, confused, betrayed, cheated, radically abused and shamefully amused by the way we treat others and operate our business for selfish gains. Why should we sneeze and catch cold at a mere mention of our beloved country? Why do we lack consideration and simple respect for the common man?


My understanding is that the purpose of such reconstruction is to enhance the shareholder\'s value.

1.      Please, what is the result of this reconstruction (corporate action)? What value is enhanced?

2.      How can you forcefully take away my shares and devalue my equity because some directors of the emerging banks fraudulently exaggerated their assets and related equity in 2005?

3.      Whose fault is that? Why should I be made a scapegoat and receive punishment for the acts of other unassociated criminals?

4.      Who are those directors? Is it too late to prosecute them?

5.      What of the auditors, consultants and many others who carried out the merger……can’t they be sued and punished?

6.      Where are all the actors who participated in the merger?

7.      How can such a corporate action be approved by SEC and other authorities?

8.      Is it not illegal and atrocious?

9.      Who protects the shareholders? Where is SEC, Central Bank, NSE and other shareholder\'s associations as financial watch dogs?

10.  Where is our sense of transparency we always preach and proclaim?

11.  Where are all right thinking Nigerians? Where are all the social activists in Nigeria? Who will defend the weak and wary in Nigeria?

12.  It is clear that the directors of these corporations have extensive and unyielding power to manipulate the market and fate of the shareholders. It also appears that these directors, who have unrestricted access to “privilege inside stock information\", offloaded there shares before they embark on their mission to manipulate the life of unprotected investors through the share reconstruction.

13.  Where is the incentive to cross the Atlantic and risk your hard earned resources in Nigeria stock market? This is very incomprehensible.

14.  What kind of irrational and jungle justice is this? Also consider the timing of the share reconstruction. This was done when there is a general and persistent drop in stock prices and general lack of trust and confidence in the stock market.


What is the rush and motive behind the reconstruction? Is it needed or necessary? Is there any immediate court action or judicial judgment that mandates such corporate action?


There is every indication that all the banks have engaged in a dangerous and never-ending marathon to determine who is the biggest. This has resulted in bogus and fraudulent public offering, private placements, share reconstruction and intentional bloating of financial statement numbers. We are not familiar with the concept of “small and beautiful”. Being the biggest and fattest does not make you the best.


In the US, there are many century old banks that refuse to grow big, because they take pride in the quality and value of services they provide to their customers and shareholders. There are many businesses that force themselves into financial coma because of their huge size. Sterling Bank does not need to be the best or biggest?


There is no urgent need to access the market to raise funds from sale of shares. There are many other options available to Sterling Bank to correct its bloated share volume without criminally hurting the shareholders. What of gradual share buyback and cancellation of such shares? With the amount of current profit, share buyback will be effective. The directors of Sterling Bank should rethink this disgraceful and irrational act.


Please pardon my tone and frustration.


I need your assistance in understanding the madness behind this corporate action and its business values. I am not upset by the general drop in stock prices, which is a familiar phenomenon. I am upset because my shares are stolen from me by the directors of Sterling Bank without due compensation and consideration. I believe that the so called reconstruction was done just to reduce the quantity of shares issued, and just to make room for future public offer. This is absolute financial nonsense.


This action can kill the confidence and trust of both foreign and Nigeria investors in the Nigeria stock market. Please, I will like to hear from you regarding this corporate action. What are the available remedies to shareholders, who are ripped off by the directors? Every shareholder of Sterling Bank should rise and fight to reverse the share reconstruction. In addition, I urge the shareholders to join hands and resources together to initiate a class action lawsuit against Sterling Bank and its directors to seek injunction and punitive damages for this inconsiderate and unholy act. I appreciate the work you are doing for all Nigerians over there. Thank you very much and I hope to hear from you.






Raphael C. Okoye, CPA


cc: Charles Soludo, Governor, Central Bank of Nigeria

cc: Musa Al-Faki, Director General, Nigerian Securities & Exchange Commission

cc: Mrs. Farida Waziri, Chairman, Economic and Financial Crime Commission

cc: Sunday Nwosu,Chairman, Independent Shareholders Association of Nigeria

cc: Gbenga Idowu, Chairman, Shareholders United Front


Share reconstruction, also known as reverse stock split is a mechanism used by companies to reduce the number of outstanding shares and increase their share price proportionately without affecting the total book value of those shares. It decreases the num



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