Not less than 20 companies that were previously listed on the Nigerian Exchange have chosen to leave the local stock market.
Companies go public in search of liquidity in their shares. Companies can raise a lot of funds by going public. They can use the money for a variety of things – expand operations, introduce new products, invest in Research & Development, and pay off their debt. Going public also enhances the credibility of the companies– they can easily convince banks and other lenders to provide loans on better terms (private companies tend to pay a higher rate of interest because of lack of credibility).
Stock market listing is also usually a dream achievement for many companies as it is a major boost to their pulic credibility, but companies can also be delisted from the bourse. While some get delisted for sheer non-compliance, others have chosen to leave voluntarily.
When a company decides to leave the stock market, they have to pay shareholders to return the shares held by them, and the name of the company is removed from the exchange. But why would a company deliberately choose to no longer be a listed company?
Apparent reasons are that the benefits of being a public company no longer exist for these companies or are overshadowed by the cost of being public.
Over 118 companies have delisted from the Nigerian Exchange to date, the reasons given include regulatory delisting (NAICOM, NGX, others), mergers and acquisition, voluntary delisting, nationalised banks, and licence withdrawal.
Some of the big names that have left the Nigerian bourse are United Nigeria Textile (2011), Seven-Up Bottling Company (March 2018), Poly Products (July 2005), Paints and Coatings Manufacturers Nigeria (August 2018), Nigerian Textile Mills (2008), and Nigerian Bottling Company (2011).Seven-Up Bottling Company (7-Up) delisted after it received a takeover bid from its majority shareholder, Affelka, aimed at restructuring the soft drinks bottler. Seven-Up Bottling Company last traded on the Nigerian Exchange Limited at N101.97 per share, valuing the company at N65.32 billion ($214m). The company's exit consequently reduced the entire market by N65.32 billion.
More controversial was Nigeria Bottling Company’s decision to leave the Nigerian Exchange after 38 years on the mainboard, which raised questions regarding the attraction it held for quoted companies. Shareholders had to give up their right to keep drinking from Coca-Cola dividends on the floor of the Exchange to Greek-based Coke bottler Coca-Cola Hellenic (CCH) in a deal worth N21 billion ($136m) at that time.
Other big companies that opted for voluntary delisting are: 11 plc (May (2021), Continental Reinsurance (January 2020), Dangote Flour Mills plc (November 2019), and Great Nigeria Insurance (January 2019).
Some other companies that willingly opted out of the Nigerian Exchange and the years they left are: Newrest ASL Nigeria (May 2019), Nampak (2011), IHS Nigeria (May 2015), Impresit Bakolori (2002), Incar (2010), and First Aluminium Nigeria (July 2019). Also, Enpee delisted from the Nigerian Exchange in 2008; CFAO Nigeria (2007), Avon Crown Caps and Containers (September 2017), and A.G. Leventis (Nigeria).
After 43 years, 11 plc, formerly Mobil Oil Nigeria plc, delisted its shares from the Nigerian Exchange on Friday, May 7, 2021. Although the delisting of the entire issued share capital of 11 plc followed its shareholders’ approval to delist from the Exchange, it is worthy to note that as at the close of trading on May 7, 2021 (11 plc’s last day on the NGX) its market capitalisation stood at N82.22 billion. The delisting of the 360.59 million units of shares of 11 plc led to a negative market close and a decline in market capitalisation on that last trading day of the week.
As for Dangote Flour Mills, it was delisted from the Nigerian Exchange's daily official list following acquisition by Olam International Limited, which had bought all outstanding and issued shares in Dangote Flour Mills for N120 billion.
The Nigerian Exchange had announced the delisting of A.G Leventis Nigeria from its daily official list, saying that the company had voluntarily applied for a delisting, which it approved on December 31, 2019. The entire issued share capital of A.G. Leventis was on Tuesday, January 7, 2020, delisted from the daily official list of the Exchange.
Before delisting, A.G. Leventis had said its core shareholders ― Boval S.A, Leventis Holding S.A, and Leventis Overseas Limited ― had planned to acquire the shares held by other shareholders.
Boval S.A, which acted on behalf of the other core shareholders, had approached its board of directors with an intention to acquire the shares held by other shareholders at an offer price of 53 kobo per share and subsequently delisted the company from the NGX.
Many times, the companies’ long-term goals might no longer align with the shareholders’ immediate-term goals – for example, dividends. Many companies begin to realize that the money they pay as dividends could have been used to invest in future growth prospects – which will be possible if they were private, because then there is no pressure to pay out dividends to shareholders.
The pressure and cost of dealing with regulatory authorities could also be among the reasons. Depending on the size of the company, listed firms pay an annual listing fee to the stock exchange on which they trade. Also, public companies pay for the periodic reports they filed or even failed to file with the regulatory authorities (for example, the quarterly results report, and the annual report).
|OMOLUABI MORTGAGE BANK PLC||0.60||0.60||0.00|
|ACCESS BANK PLC||16.85||16.85||0.00|
|FIDELITY BANK PLC||8.10||8.35||3.09|
|TRANSNATIONAL CORPORATION OF NIGERIA PLC||6.01||6.61||9.98|