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Transcorp – Volume Movements indicate Possible Takeover Bid or Market Abuse




March 31, 2011
Today, 2.51 billion units of Transcorp Plc, representing 10% of its total outstanding shares (25 billion units) were crossed on the floors of the exchange and no market information was made available in this regard.
This immediately raises concerns with us as this transaction, whilst confirming the analyst comments in our March 22, 2011 review - What's driving the resurgence of the Transcorp price? ; indicates a possible takeover bid or an abuse of market processes.
The stock closed today at N1.11k, a 122% YTD increase in price on the back of fundamentals aptly captured in the aforesaid report.
Basic Market Transaction Ethics
To buy at least 5% of a quoted company’s shares, the minimum requirement should, at the very least, follow the following market ethics:
1.    The NSE approved broker handling the transaction must enquire from the buyer his/her existing holding in the company;
2.    The broker must then proceed to review/add the volume of the intended transaction to/with the existing holding and determine if this goes above the 5% threshold (i.e. what is about to be bought and what is currently held);
3.    The broker is therefore obligated to inform/alert The Stock Exchange if the transaction is above the 5% threshold;
4.    The Stock Exchange must immediately alert the company of this intended trade, informing the buyer that it has done so;
5.    The company would then have a chat with the buyer to determine if it is a takeover bid or not, and to determine any interest such a person may have;
6.    The company must within 48hours get back to The Stock Exchange if they have any reservations or objections to such a transaction;
7.    If it is a hostile takeover, the provisions of the ISA 2007 in respect of such would form the basis for moving forward.  
These basic ethos provide a basic framework in which such transactions have and should be conducted. To have a 10% volume movement treated as just any other transaction is an abuse of the market processes.
Courting a Value laden bride
Ten (10) days ago, little did we know that such would happen but the signs where there. This action simply validates our market call on the Transcorp stock.
In the executive summary published, we made allusions to the set backs in model, board constitution, debt overhang, management challenges and the political risks that confronted the institution which had been deftly managed, against all expectations, to deliver a company that appears focused and ready to deliver on its shareholder commitments. The analysis sought to explain the raison d'être for the resurgence in the price of the stock. Since then (N0.81k) the stock has gained 37.04% (N1.11k) suggesting a sustained interest in the stock.
Source : Proshare Analyst Services
Today’s Volume Activity
The conglomerate sector led the market transaction volume today with 2.51billion units valued at N2.81 billion (US$19.07Million) exchanged in 198 deals as against 31.28million units valued at N96.31million (US$0.652million) exchanged in 261 deals recorded previous session.
Transaction volume on the exchange surged by 571.82% to close at 2.72 billion units exchanged in 4,842 deals as against an upbeat by 18.97% recorded in previous trading to close at 405.87 million units exchanged in 7,962 deals.
A cursory analysis of the prices and volume figures of Transcorp from January 4, 2011 till date reveals that the Volume today for Transcorp is exceptionally high (2.51 billion units) when its average volume traded during the year is 6.10 million.
The Implications
It would appear that there is an issue with this transaction. Certain persons with funds have decided that this company’s fundamentals represent a good investment and have decided to take advantage of this benefit. 
The question now needs to be asked – how did this deal go through – with NSE approval with or without the company’s consent. The board and the NSE owe the market an explanation.
Informed sources point to an ex-bank CEO who has shown a bullish approach to the firm and who has support from a leading stockbroking firm that hitherto had issues of ethical boundaries with the exchange.
We await the report from the NSE on this transaction and a validation or rebuttal of the compliance guidelines 
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