| Unlisted OTC MARKET |    1022 VIEWS  |
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Saturday,
May 16, 2020 / 06:12 PM / NASD Plc / Header Image Credit: NASD
In our newsletter last week, we continued our series on Crowdfunding and highlighted the potential benefits accruable to MSMEs who seek patient capital by sourcing via Crowdfunding. Click here to read more.
In this week's edition on crowdfunding, we shall
discuss the importance of regulating Crowdfunding as a source of capital for
Start-ups; the consequence/outcome if the entire process is left unregulated.
The importance of capping excesses of all players - MSMEs, Investors,
Crowdfunding Platforms/Portals.
The goal of the proposed Rules on Crowdfunding is to
ease the means of funding that had long been considered risky. Also, to provide
an opportunity for retail investors to participate in start-up investing. It is
a great attempt at opening the capital markets both to businesses raising
capital and investors desiring to invest in small businesses.
Issuer limits.
1. Cap On Amount To Be Raised
According to the proposed SEC Guidelines, MSMEs
seeking to raise capital on a Crowdfunding Platform are limited to a 12-month
period within which they can raise funds:
i. The maximum amount which may be
raised by a Medium enterprise shall not exceed N100 Million.
ii. The maximum amount which may be
raised by a Small enterprise shall not exceed N70 Million.
iii. The maximum amount which may be
raised by a Micro enterprise shall not exceed N50 Million.
MSMEs must for each funding round reach minimum fund
raising threshold before funds can be disbursed. Where the minimum threshold is
not achieved the monies pooled are returned to the Investors.
There is also a short list of Instruments approved by
the Commission for issuance through a crowdfunding portal from time to time;
these include equity/shares, plain vanilla bonds or debentures, and simple
contracts.
2. Disclosure Requirements
According to the proposed SEC Guidelines, MSMEs are
bound by disclosure requirements. MSMEs are required to provide reviewed
financial statements to the SEC, investors, and crowdfunding portals. They are
also bound by ongoing disclosure requirements i.e. quarterly and annually. The
disclosure requirements and use of professionals in vetting these reports is important
to protect investors who may be less sophisticated.
Investor Limits
The proposed SEC rules prescribed limits for
investors' contribution to crowdfunding campaigns. Interestingly, the caps are
not a single campaign, but aggregate on all campaigns. These are aggregates
over all offerings in a twelve-month period.
i. Retail investors may not invest
more than 10% of their annual income in a calendar year.
ii. Sophisticated, High Net worth
and Qualified Institutional Investors are not subject to the limits set forth
above.
Investors are allowed a cooling off period of 48 hours
from the date of close of a campaign within which they may withdraw their
investment. If there is a material adverse change, affecting the project or the
issuer, investors may rescind the investment within 7 days from the date the
material adverse change became public.
Where an investor cancels the offer or agreement to
purchase securities or investment instruments, all funds which may have been
debited from or blocked in the account of the investor shall be refunded or
released within 48 hours of the request to cancel. This is to adequately
protect an Investor from suffering any undue loss.
Crowdfunding Portals
It is important to state that the Crowdfunding portals
are saddled mostly with vetting an Issuer and protecting an Investor
simultaneously. First, Issuers conducting offerings must provide educational
materials to investors explaining a laundry list of things which includes,
their investment process, the types of securities offered as well as resale
restrictions and investment limits.
Secondly, due diligence must be performed on the
issuers to a 'reasonable' basis to ensure that they are not committing fraud,
as well as on investors to ensure their compliance with investment limitations.
In addition to those requirements, which are generally meant to protect against
fraud, the portal must monitor offerings, investors and assist with
transparency.
Conclusion
NASD in its capacity as a regulator shall continue to
ensure transparency within the capital market and also protect investors with
regards to transactions and activities on our market. We believe our values
position us suitably to provide excellent service to our stakeholders and
contribute meaningfully to the growth of the Nigerian Capital Market.
Year-to-Date Overview
NASD OTC Securities Exchange Market closed on a
negative note this week, as the market recorded a decrease in performance. NASD
Security Index Year to date return fell by -0.52%. Total volume traded
Year-to-Date stands at 7,617,720,159 units in 550 deals and total Value traded
is N7,434,428,437.88.
Week 20 Overview
NASD OTC Securities Exchange closed the week with a negative return in NSI. The NSI return fell by -0.92% to close the week at 693.94 points against 700.39 points in the preceding Friday, May 08 2020.
In addition, Week 20 saw NASD Investors lose N4.71 Billion in value.
NASD OTC Market capitalization closed at N509.75 Billion compared to N514.46 Billion in the preceding Friday, resulting from
a negative movement in prices.
There was a 82.5% increase in the total value traded during the week as week 20 saw NASD Investors trade a total of N9,671,300.00 in value compared to N5,289,300.00 in the previous week. Total trade activity for the year is valued at N7,434,428,437.88.
In the same pattern, volume traded during the week was
73,715 units compared to 226,825 units in the previous week leading to a
-67.7% decrease in trade volume compared to week 19. Total volume traded for
the year is 7,617,720,159 units.
Top Traded Securities by
Volume
The week closed with Niger Delta Exploration and
Production Plc Ranking top among top five most traded securities by volume and
Afriland properties as the least traded among the five most traded in week 20.
Top Traded Securities by Values
The week closed with Niger Delta Exploration and
Production Plc Ranking top among top five most traded securities by value and
Afriland properties as the least traded among the five most traded securities
by value in week 20.
Guess Who Gains!
One of NASD OTC big stocks closes the week with a
positive increase in value. Afriland Properties Plc which currently holds a
Market Capitalization of N3.02 Billion closes the week at N2.2 representing a 4.67 percent increase from the
previous close of N2.1.
Big Stocks Decline!
Two of NASD OTC big stocks closes the week with a negative decrease in value. Niger Delta Exploration and Production Plc which currently holds a Market Capitalization of N52.97 Billion closes the week at N292 representing a -1.02 percent decrease from the previous close of N295.
Central Securities Clearing System Plc which currently
holds a Market Capitalization of N63.45 Billion closes the week at N12.69 representing a -6.35 percent decrease from the
previous close of N13.55.
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