MTN Listing: Price Momentum Breaks on Rise In Traded Stocks; Proshare Writes Memo to Market


Sunday, May 26, 2019    / 12:45PM / By Teslim Shitta-Bey, Managing Editor/ Header Image Credit: EcoGraphics

Download PDF Report Here 

As the NSE All Shares Index (ASI) responded to six consecutive days of MTN share price increases, upon listing by way of introduction, Proshares Nigeria was compelled by the balance of evidence to write a 57 Page Memo  to the Market to provide clarity above the noise of adversarial comments in the public space. The findings of Proshare investigation into the implications of the MTN listing by LBI unveiled fundamental weaknesses in the rules guiding LBI listings on the floor of the Nigerian Stock Exchange (NSE) and provides further reasons for the Exchange and the apex regulator The Securities and Exchange Commission (SEC) to review extant practices and rules to ensure a more transparent process of pricing newly listed securities. 

A review of the MTN listing process and subsequent events that followed a week of trading frenzy in the stock clearly indicates that a problem exists with the mechanism by which large cap stocks are listed on the Exchange.

This speaks to the urgent need for the Exchange and the apex market regulator to provide direction and authenticity to the process by which new issues are offered to new investors. The process by which large companies get listed on the exchange by introduction without creating float to drive price discovery is flawed. The recent vociferous protests by market entities concerning the lack of liquidity in MTN shares on the market and the sudden rise in the stocks equity value because of an alleged absence of tradable quantities on the bourse, reflects this challenge that needs to be addressed forthrightly by the regulatory authorities.


The conflicting interest between old and prospective investors needed to be resolved by a market architecture that ensures that pricing of new offers and their liquidity on listing dates are assured in order to guarantee a market governance frame work that is consistent with best global practices and does not leave market regulators open to suggestions of bias.

In the contemporary case of the MTN LBI several lessons appear to have been learnt and are captured in Proshare’s recent market memo.

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Six Days of Sizzling Movement

For six consecutive days the price of MTN shares soared in an upward trajectory seeing the stock value rise by 20% in just two days of trading and by a further 60% on the fourth day of market activities; however the fever broke on Thursday as existing shareholders began to release additional quantities of the stock for trading on the floor of the Exchange. The Telcos share price dropped from N149 on Thursday May 23, 2019 to N140 per share on Friday May 24, 2019, representing an expected -6.04% price reversal as traders began to bid and offer for the security on the floor of the bourse.  

A major reason for the reversal was the action taken by existing shareholders to place more of the company’s shares on the floor for trading.  This was after six days of a straight price rally that saw the company’s equity price rise from a listing value of N90 per share on May 16, 2019 to N149 per share on May 23, 2019, representing a week on week (W-o-W) rise of +65.6%. The market price bubble burst on Friday on rising tradable stock and reduced investor pressure.


Chart 1 Selected Index and MTN Price Movements 2019

Proshare Nigeria Pvt. Ltd.

Source: NSE/Proshare TheAnalyst

Proshare’s market deep dive revealed that the early price surge of the Telco’s equity in the first six days of trading was inspired by an act of omission by the advisers to the listing and managers of the Exchange. Unlike, the usual practice where companies coming to the Exchange for public offer either by way of Introduction or Initial Public Offering (IPO) and sell limited quantities to new investors as a gesture of goodwill, the MTN listing appeared to have breached this market convention leading to an expectation gap between prospective buyers and existing shareholders of the company (creating the Nash equilibrium dilemma referred to in the report).


Market Rides MTN Tailwind

In a whirlwind week of major price movement, demand pressure for previously unavailable MTN stock reversed the negative year-to-date (YTD) performance of the All Shares Index (ASI) with the Index rising to a positive market yield of +0.5% on the Telcos first trading day. Indeed, the market Index rose by 6% within five days of trading activities on the stock as buyers struggled in apparent vain to lay hands on desired quantities of the Telcos shares.

Table 1 MTN Share Price and Volume Traded From May 16 -23, 2019

Proshare Nigeria Pvt. Ltd.

Source: NSE, Proshare research

The major challenge with the MTN listing was the gap in the rule that allowed companies list on the premium board as long as they offer a minimum of 20% of their outstanding shares or N40 billion in capitalisation. This rule has since been undermined by the relative sizes of new mega listings on the market floor and has created a situation where new firms listed on the Exchange can get away with offering little or no float for trading thereby leading to the artificial inflation of their share value as analysts and traders insist was the case with the three day 60% increase in the market value of MTN. 



Chart 2  MTN Price Movement May 16-24, 2019

Proshare Nigeria Pvt. Ltd.

Source: NSE/Proshare research  

 The rise in the value of MTN over the last 6 days has placed it in a position where the company has one of the highest price-to-earnings multiple for any listed company on the Exchanges premium board with its P/E of 20.8.


ChartP/E Ratio for Selected NSE Premium Board Companies

Proshare Nigeria Pvt. Ltd.

Source: Audited Annual Accounts FY 2018/Proshare research

Dangote the Exchanges largest capitalized stock still dominates the premium board’s earnings. This is understandable as it trades at a price to earnings ratio that creates hidden value opportunities for investors. DANGCEM presently trades at a P/E ratio that is half and a half times that of MTN which commands a recent P/E of 22 on a trailing twelve month (TTM) earnings per share for FY 2018.

Chart 4  EPS Ratio for Selected NSE Premium Board Companies

Proshare Nigeria Pvt. Ltd.

Source: Audited Annual Accounts FY 2018/Proshare research

At the close of market activities for the week, MTN saw its share price drop as volumes also tumbled on sellers and buyers working out a fair market value for the Telco at available market quantities of freely traded equities on the floor.

Proshare Nigeria will, to the best of its ability, continue to monitor developments in MTN’s post listing activities in a manner that supports best market governance practices and provides market information that may serve as guidance for investment entities seeking clarity. 

Download PDF Report Here 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Analyst(s) and CMO Comments/Reports Pre-Listing

1.       MTN Nigeria IPO Teaser – Listing and Precursory Information - Jun 01, 2018

2.       MTN Nigeria To List On The NSE; A Promise Fulfilled – OTC Equity Research – Mar 26, 2018

3.       MTN - A case study for market-supporting institutions – Temitope Oshikoya – Nov 03, 2015


Third Parties Comments Posts Listing

4.       Ferdi Moolman: The CEO who painted Lagos Bourse - - May 21, 2019

5.       Scarce MTN shares heighten brokers' anger - Businessday NG – May 21, 2019

6.       SEC Probes MTN Listing on Stock Exchange – THISDAYLIVE – May 21, 2019

7.       Meet The 6 Largest Individual Shareholders In Mobile Telecom Giant ... – Forbes – May 19, 2019


Analyst(s) and CMO Comments Posting Listing

8.       VIDEOCapital Market Analyst, Rotimi Fakoyejo, Speaks On Shares Manipulation Allegation Against MTN – Arise News – May 21, 2019

9.       MTN Nigeria’s Listing by Introduction: What the True Picture is – Afrinvest – May 21, 2019

10.   Bullish Post Listing Market Reaction on MTNN Stock –Anchoria AM Research May 17, 2019


Related News on Nominal Price & Transfers

11.   NSE Rule on Nominal Transfers Takes Effect – Jul 12, 2018

12.   Notification of Effective Dates of Rules of The NSE - Pricing Methodology and Par Value Rules – Nov 06, 2017

13.   Click here to Download Full PDF on Par Value Rule  - Nov 06, 2017

14.   Click here to Download Full PDF on Amendments of the Pricing Methodology Rule - Nov 06, 2017


15.   Click here to Download Full PDF on Interpretative Guidance - Nov 06, 2017

Proshare Nigeria Pvt. Ltd.


Related News on MTN

16. Beyond The Noise: MTN’s Post Listing Reactions, Gaps in Rules and Lessons Learnt

17.   MTN Nigeria Provides Clarity On Its Listing Price and Preference Shares Redemption – May 21, 2019

18.   NSE Clarifies Concerns on MTN Nigeria's Premium Board Listing – May 21, 2019

19.   MTN Listing Memorandum – (PDF) – May 16, 2019

20.   VIDEOHighlights of MTN Nigeria Listing At NSE – May 16, 2019

21.   Nigeria Stock Exchange Admits MTN Nigeria Communications Plc to its Premium Board – May 16, 2019

22.   A Fool’s Guide to the MTN Nigeria’s 2019 Public Listing - May 16, 2019

23.   MTN Nigeria Receives Approval To List On The Premium Board Of NSE; Listing To Proceed On 16th May - May 15, 2019

24.   MTN Q1 2019 Conference Call; Key Takeaways, Management Keeps Firm Hand on Profit Machine - May 15, 2019

25.   MTNN Q1 2019 Analyst Presentation – May 13, 2019

26.   Extracts For MTN Nigeria From The Group Quarterly Statement Update for Period Ended March 2019 – May 09, 2019

27.   MTN VS AGF: Court Rejects AGF Preliminary Objection – May 07, 2019

28.   SEC Nigeria Confirms Receipt of MTN Application for Registration of Securities - May 07, 2019

29.   MTN Announces Conversion From A Private Company To A PLC - Apr 24, 2019

30.   MTN to List On the NSE Before End of H1, 2019 - Mar 14, 2019

31.   MTN Nigeria Releases Financial Results For The FYE Dec 31, 2018; Plan To List on NSE By H1 2019 - Mar 07, 2019

32.   MTN Nigeria Resolves Amicably Issues Relating to Foreign Exchange Remittances - Dec 24, 2018

33.   Providing Reliable Connectivity for Businesses: MTN Delivers Cutting Edge Solutions to NNPC - Dec 12, 2018

34.   Reports Indicate That Nigeria’s Central Bank and MTN Reach Tentative Agreement On $8bn Fines - Nov 11, 2018

35.   MTN Nigeria Sues FGN and AGF For N3billion – Nov 09, 2018

36.   MTN Seeks Judicial Intervention, Sues The Attorney General and Central Bank Over $10.1b Demand – Sep 10, 2018

37.   Banks, MTN Engage CBN Over $8.1b Fine; Factually Incorrect Premises Highlighted  Sept 03, 2018

38.   MTN Nigeria, Banks and CBN Action – An Update and Initial ... - Sept 01, 2018

39.   MTN Ghana Successfully Completes Its Initial Public Offer – Aug 31, 2018

40.   MTN Replies Nigeria's CBN – You Approved The Funds Repatriated Aug 30, 2018

41.   Stanbic IBTC Notifies of Regulatory Fine in Relation to MTN - Proshare Aug 30, 2018

42.   Stanbic IBTC Notifies of Regulatory Fine in Relation to MTN – Aug 30, 2018

43.   CBN Clamps Down on Four Banks; Writes MTN to Refund $8bn – Aug 29, 2018

44.   MTN Nigeria – Interim Financials For H1 2018 - Aug 14, 2018

45.   Neither MTN Nigeria Nor Any of Its Advisers Has Filed Any IPO Application With SEC Nigeria - Jul 09, 2018

46.   MTN Ghana Launches Mobile Money Based IPO - Jun 10, 2018

47.   MTN sues NCC over N780 billion fine - Premium Times Nigeria - Dec 18, 2015

48.   MTN Group share price drops by 10% - Proshare – Jun 17, 2005

Proshare Nigeria Pvt. Ltd.



Related News on Exchange Rules

49. NSE, SEC Streamline Listing Process to Encourage More Listings – May 23, 2019

50.   NSE Notifies Of The Effective Dates Of Its Rules On Listing On The Growth Board, Free Float – May 22, 2019

51.   NSE Notifies of SEC Approval of Rules of The Exchange - May 13, 2019

52.   NSE Issues Circular On The Adoption and Compliance With Nigerian Code of Corporate Governance, 2018 – Feb 15, 2019

53.   NSE Launches X-Bot to Enhance Market Participation – Dec 28, 2018

54.   NSE Proposes Rule for Listing of Green Bonds on The Exchange – Oct 04, 2018

55.   NSE Reviews Equities Market Structure to Improve Liquidity and Participation – Jun 25, 2018

56.   New Rules on Suspension of Trading in Listed Securities – Matters Arising – May 22, 2018

57.   Proposed Rules for Price Stabilization of Securities and "The Greenshoe Option” – Mar 26, 2018

58.   NSE Proposes Rules for Price Stabilization of Securities; Calls For Comments – Mar 22, 2018

59.   NSE Proposes To Amend Rulebook on Special Purpose Vehicles; Calls For Comments – Mar 21, 2018

60.   NSE Proposes Amendments to Dealing Members Rule(s) 7.4 and 7.5 – Nov 16, 2018

61.   NSE Releases Sustainability Disclosure Guidelines – Nov 16, 2018

62.   NSE Proposed Rules on Free Float, REITs and Listing on the Growth Board – Jun 01, 2019

63.   NSE Notifies of Effective Date of Rules on Large Volume Trades and Block Divestment – Feb 06, 2018

64.   NSE Calls for Comments and Drafting of Rules on the Derivatives Market – Jan 02, 2018

65. NSE Pricing Methodology - The New Par Value Rule And You – Nov 09, 2017

66.    Notification of Effective Dates of Rules of The NSE - Pricing Methodology and Par Value Rules – Nov 06, 2017

67.   NSE Issues Notification of Effective Dates of New Rules for Dealing Members – Oct 25, 2017

68.   What ISA 2007 and NSE Rule Book 2015 Say About Filing Interim/Audited Accounts of Quoted Firms – Oct 10, 2016

69.   NSE Proposes Amendments to Rules 15.31, 15.32 & 17.13 of the NSE Rulebook - Feb 19, 2016

70.   NSE Introduces The Rulebook 2015 – Dec 31, 2015

71.   NSE Proposes To Amend Rulebook on Special Purpose Vehicles; Calls For Comments – Mar 21, 2018

72.   New Rules on Demutualization of Securities Exchanges in Nigeria Proposed – Apr 12, 2015


Related News on Free Floats

73.   NSE Releases Latest X-Compliance Report; Includes Fine for Disclosure Violations, Free Float Def. – Apr 23, 2019

74.   Level of Compliance and Free Float Deficiencies on NSE – Jun 07, 2016

75.   Free Float Deficiencies: CHELLARAMS Yet to Comply as due date elapse – Mar 03, 2015

76.    DANGCEM, UBN and 9 Others Still Have Free Float Deficiencies – Jul 02, 2015

77.   NSE Seeks to Amend Rules on Free Float, Filing of Accounts and 3 Others – Feb 26, 2015

78.   Aluminium Extrusion Industries Plc Joins List of Companies With Free Float Deficiencies – Oct 09, 2014

79.   NSE Grants Waivers to DANGCEM, UBN and 4 Others on Free Float Deficiencies – Sept 22, 2014

80.   NSE Lists DANGCEM, UBN and WEMABANK as firms with Free Float Deficiencies – Apr 02, 2014

81.    Aluminum Extrusion Industries Plc Joins List of Companies With Free ...  – Oct 09, 2014

82.   X-COMPLIANCE: 32 Delinquent Filers of Accounts & 5 Equities with Free Float Deficiencies– Feb 08, 2013

83.    Listing Rules: NSE confirms list of firms with Free Float Deficiency Oct 02, 2012 

Proshare Nigeria Pvt. Ltd.



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