By Eromosele Abiodun, 06.02.2010
The Nigerian Stock Exchange (NSE) yesterday disclosed that it has concluded arrangements to delist 11 of the remaining 16 companies listed on the Second Tier segment of the market. Assistant General Manager and Head, Alternative Securities Market /Private Placement Department (ASEM/PRIPEX), Mr. Funs Fatobi, made this known yesterday at a one day joint workshop for Capital Market Correspondents in Lagos.
Fatobi, who spoke on behalf of the Exchange, said that the companies will be axed for non-performance and their failure to fulfill their post-listing obligations in the last three years to both the investing public and the Exchange. He said: “We have observed that for several years there was stagnancy in that market as a result of various challenges that faced the companies. The challenges, which are both internal and external, range in the areas of finance, management, access to information, lack of skills and technologies. Other areas include corruption, which is indeed a national problem, power generation and other infrastructural hindrances.”
He added:“Despite the huge potential of the SMEs, they have continued to perform below expectations in terms of profitability and return on investment. Also, there has not been any significant increase in the number of listed companies on this sector of the market for some years now. Trading activities in this sector is so low that its contribution to the total market capitalisation is less than 1 per cent.” Modeled after the London Stock Exchange (LSE’s) AIMs market, the newly redesigned platform, which the Securities and Exchange Commission SEC) has approved, will now the known as the Alternative Securities Market /Private Placement Exchange (ASEM/PPEX).
The ASEM/PRIPEX boss further stated that the Exchange has scrapped the second tier market, which would be replaced by the Alternative Securities Market /Private Placement market, billed to commence with the process of listing of the various private placements instruments, bought into by investors in the boom period of 2005-2008. The Exchange also disclosed that it would commence the listing of all companies, which sold their shares to investors through the private placement instruments, during the period that preceded the crises in the stock market, from July 1, this year without pre-conditions.
The ASEM/PPEX, the exchange said, would assist in solving the problems faced by investors, who have no exit window to trade the securities bought from private placements.“During the boom period of 2005 and 2008, most of the companies that raised funds through private placements promised investors that the securities being offered would be listed on the NSE on completion of the issue exercise. This has not been the case, as a good number of the securities sold under the private placement exercise are yet to be listed, thereby leaving huge sums of monies left unaccounted for in the hands of these business promoters. In addition, there is no exit window for investors to trade the securities bought from private placements,” he said.
The Director General and Chief Executive officer of the NSE, Prof. Ndi Okereke-Onyuike, had while addressing reporters in Lagos recently, stated that an estimated N700 billion is locked up in various placement instruments.The situation also prompted a warning to the investing public by the SEC, in 2008, to be wary of any overtures to invest in placements, as it was not under its regulatory purview.