When an announcement was made a week ago that telecoms giant MTN was formally listing its shares on the Nigerian Stock Exchange (NSE), many potential investors rubbed their palms in excitement, as they looked to take advantage of what they expected was going to be available shares in the thriving company.
Since arriving Nigeria almost two decades ago, MTN has continuously shown its business dexterity – impressively growing its revenue to over a trillion Naira as well as investing over $18bn in infrastructural development – while providing top notch service to over 55 million subscribers in the most populous African country. In fact, its listing of 20.4bn units of ordinary shares of its existing shareholders is one of the largest in the NSE’s history.
So, it comes as no surprise that many financially aware Nigerians want to be a part of the telco powerhouse.
But, there is a caveat in MTN’s listing of shares on the NSE; The company had only announced that it was listing its shares by way of introduction. Many willing investors have misunderstood this to be that shares would be made available for sale. That is not so.
What this simply means is that the telecoms company has listed the units of ordinary shares of its existing shareholders, with no fresh issue of shares available for public purchase. This would have been a totally different case if the company had announced an Initial Public Offering or IPO.
In a nutshell, only the company’s existing shareholders can sell the shares currently listed on the Exchange. The general public can only buy such shares at a market determined price on the floor of the stock exchange, through registered stockbroker(s) – provided the existing shareholders wish to sell.
The existing shareholders are, however, under no compulsion to tender their shares for trading.
The Nigerian Stock Exchange recently said in reaction to the misconception that “without any intervention, it is possible that there will be no shares available for trading on the listing date.”
It added that “no rule of The Exchange compels shareholders in a listed company to tender their shares for trading. Shareholders are at liberty to trade their shares at any time and price suitable to them.”
While it is understandable that many Nigerians are eager to invest in shares in MTN, new investors will have to be patient to see if existing investors are willing to sell, at least before the telecoms company raises new capital by way of an IPO.