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The Vanguard E-Healine (July 14, 2014; 1:28am) reads “Investors may lose N74bn as NSE moves to delist 21 firms, some of these firms are to be delisted for failing to file their quarterly and annual financial reports and accounts with the NSE, some others failed to regularize their listing status with NSE. Whatsoever the reasons the major questions that the story quickly answers “who benefits and who loses?” shows that:
– Shareholders of the companies in focus are afraid of the loss they would have to bear. Simply put, if you had money in a company and the company suddenly is being shut down, you would also ask; who pays me back? Where is security for me?
– The NSE also loses credibility with regards to foreign investor’s perception and even upcoming businesses who potentially would probably be listed in the course of time
– The report also highlights the effect of delisting on NSE capitalization value which runs to a loss in Billions of Naira.
Interestingly the real estate sector is also involved, where G. Cappa and Pinnacle Point Group PLC totaling N 35.149 billion loss in market capitalization. The real estate market has been perceived so far as an imperfect market where such market is defined as one which is not traded openly and the cost of entry is inhibiting free entry and exit. The gradual effort of the Real Estate/ Construction subsector to emerge as an informed market may also be negatively discouraged by this new development.
Ultimately, the greatest dangers posed by the delisting of companies are hinged on the threat it poses to changing morale or perception of financial market participants who are somewhat new to the NSE scenario.
Reality Check : Need Corporate Content Services?
The NSE has a right to list and to delist; in fact the opinion of CEO NSE Mr. Oscar Onyema is that the life of an Exchange involves listing and delisting. Inherently informed investors should calibrate risk to return values with cognizance to delisting risks. This kind of risk is “finite” in nature and should best be determined by history and nature of management. New and upstart companies are more subceptible to this risk (*note: this is just hypothetical risk theory yet unproven).
Delisting protects investors against dummy trades, speaking to CEO NSE Mr. Oscar Onyema press reports state that the publication is just a warning however, it is necessary to protect investors against companies who have stayed more than two or three years without a financial statement.
The situation is part of transition and growth
It would be a disregard of regulations contained in the Greenbook (Listing rules) by the Nigerian Stock Exchange. Without execution of regulations and policies, the Stock Exchange loses its ability to create a secure platform for Business owners and financiers to meet; this defeats the purpose of the NSE.
Shareholders claim that the exercise is aimed at undermining their investments, this is a valid fear. Investment is setting aside of capital sum in view of future returns which is subject to risk or in other descriptions investment is setting aside capital with a view to gaining profit which is subject to vagaries of risk and return. The situation calls for a non-sentimental decision. A company who has no proof of value would inadvertently probably cost an investor fortunes, making the “sell-out” call may be a tough one when warnings for delisting occurs especially when the investor is yet to recoup capital. However, if chances still exist to liquidate such portfolios, it would be an excellent choice for the risk-averse investor. The investment platform is not a place for sentiments or emotional choices, fact must be faced that NSE has a duty to protect investors from dummy trades hence delisting measures. Some shareholders also hold the opinion that NSE owes them duty of making efforts to ensure they can recoup their investments from the defaulting companies and this would definitely be a good way to prove that investors are secure within the Nigerian Financial Market.
Possible Public statement
A simple sample could go as follows:
To all stakeholders, shareholders, the General Public who have seen recent publications in the Press concerning delisting of certain companies, it is in good faith that we announce that top management officials and staff of the National Stock Exchange (NSE) have been labored with the task of providing a common ground on which interests of all the parties affected by the Delisting exercise would be reasonably protected. The Process has yet to reach a conclusive measure but warnings to the defaulting entities have been issued, we implore all concerned to exercise faith in the well regulated system operated by the NSE with the hope that defaulting companies would amend the existing status.
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