Customs Street Advisors

This week on Street Talking in NEXT, I discuss the challenges small- and mid-cap companies on the Nigerian Stock Exchange face in attracting and sustaining investment community attention. I conclude with a number of recommendations.

Initial public offerings and listings are very exciting events in the life of a company. Endless consulting sessions with advisers, regulatory filings, travel logistics for road shows, analyst presentations and PR campaign vetting impress on insiders that the company is crossing an historic threshold. Read More…

This week on Street Talking in NEXT, I argue for the listing of successful private companies on the Nigerian Stock Exchange.

Alright, so today’s title should have been ‘My Christmas wish list’. In fact, I got bitten by this wishful thinking bug only a few days to Christmas. On December 20, 2009, Binos Yaroe, general manager, Market Operations & IT at the Nigerian Stock Exchange, announced that its governing Council had approved the change in name of its junior board from Emerging Markets to Alternative Investment Market & Private Placements. The move, he explained, was to ‘provide incentives and waivers’ to more companies to list on the NSE. That was the fire for my wire. The only snag is that now that the festive season is over, wish lists have been put on freeze. Well, sort of. But mine is a different kind of dream gift basket. The presents are not really for me in the selfish sense of sole ownership or benefits. On the contrary, granting my wish would profit the genie as much as the kettle rubber. Read More…

The past year has not been kind to investors on the Nigerian Stock Exchange. From the euphoria of 2007, the market has plumbed previously unimaginable lows. Typical of such U-turns of fate, everyone has denied responsibility for the roles they played in the descent to hell. For companies and investors, claiming to the victim numbs the pain. This week in NEXT, I use the extreme metaphor of the drug addict to show how investors allowed themselves to be seduced by the market highs and why companies, who arranged these fixes, encouraged the habit.

If the three Rs, namely reading, writing and ‘rithmetic are the foundation of basic learning in elementary school, for investors on the Nigerian Stock Exchange (NSE), the apposite Rs would be rancor, recrimination and regret. For them, intemperate, even if misconstrued, statements by the Central Bank governor, whatever the genuine intent, have only rubbed insult to injury. Today, blame and bitterness are their trademark sentiments. This is a tragic tale of an acid trip gone awry. Read More…

In Nigeria, shareholder associations enjoy a disproportionate amount of space in most media coverage of comments on company actions and performance.  Frequently, the attributed statements of these associations’ officers are overwhelmingly positive, irrespective of the actions or performance. This can give a misleading view that the companies have the full support of shareholders. No dissent, no critique, no balance. This week in Street Talking on NEXT, I recommend three credible alternative sources of information that the press should include in its reporting on company results and plans.

Reading news stories about company results and public offerings I often wonder if they are all written by the same writer. The titles all share an uncanny familiarity. ‘Investors tickled by Company A’s FY Results.’ ‘Company C tantalizes shareholders with x kobo dividend.’ ‘Shareholders overwhelmingly laud Company E’s planned bond sales.’ Read More…

In this presentation,  Robert Passarella offers engaging insights on how the internet is changing the way equity research is done, and its implications for companies, issuers, investors and markets in general.

Compelling financial communications lies at the heart of every successful securities sale transaction. As the drought in developed credit markets spread to the local equity market in 2008, the competition for capital became much tighter. Now more than ever, it is vital for companies planning to raise capital to ensure that they are represented by a financial communications team that fully understands both traditional and new media channels with the contacts and credibility to initiate balanced coverage of the company pre- and post-IPO. Its goal should be to ensure that the value case for the transaction be made as clearly, succinctly and compelling as possible to the investment community. The initial public offering of Honeywell Flour, which opened on December 3, 2009, provides a good test case to examine how Nigerian companies are evolving their financial communications strategies in difficult market conditions.

Last year will go down in history as annus horribilis for investors on the Nigerian Stock Exchange. After years of heady growth, when public offerings succeeded more from momentum and frenzy and less on a clear understanding of the underlying business with its risks and opportunities, buyer’s remorse is the new mood of the times. Return is dead. Caution is new king.

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Not much attention has been paid to the role of PR agencies in the success of the Nigerian stock market in recent years. Rather, most commentators have laid emphasis on the critical role played by regulatory changes, macroeconomic conditions and the shifts in corporate financing patterns of Nigerian companies in the liftoff of equity investing among Nigerians. However, a careful look at the success of most offerings will show a tight positive correlation between the brand visibility of institutions and their success in raising capital. One may go as far as saying that during the 2004-2007 IPO wave, investor decisions on where to invest  were drivrn by identity affinities. While this opportunistic approach, which was carefully planned by agencies may be faulted, when one considers the tight fundraising schedule, it was a pragmatic choice. It certainly succeeded in raising capital for companies. Without prejudice to the contributions of issuing houses and other midwifing agents, most issuers owe the success of their capital market entree to their PR agencies. Still, a sentimental investor clientele for equity offerings poses challenges for issuers. Since offering communications and promotions are scanty on past business performance, competitive dependencies, operating conditions and the economic environment, investor expectations are spread across a wide range. This complicates the inherent uncertainty of post-listing performance of the securities and results in increased volatility of the shares. To address these issues, companies need to work with experienced investor relations professionals to develop and execute market engagement strategies that match their situation so that fair valuation of their securities is achieved.

The July 2004 announcement by Professor C.C. Soludo, governor of the Central Bank of Nigeria, that Nigerian banks had until December 31, 2005 to raise their share capital from N2 billion to N25 billion, had three effects on the affected financial institutions.

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Richard Wadsworth and Lois Paul of Lois Paul, join Jane McCahon and Mary Conway of Conway Communications to discuss best practices in IPO communications .

Financial markets thrive on uniform access to information for all interested parties. When access is discriminatory it gives a significant and unfair advantage to those who enjoy such access. Such partial dissemination creates a number of severe problems. Over time, the mispricing of securities by ‘non-insider’ traders, who are the majority by definition, make markets less efficient due to the misallocation of resources. A second insidious effect is that when there is a widespread belief that market prices are set by those with subterranean access to non-public material information, investors tend to abandon the careful study of a company’s merit, and instead allocate resources based on rumour and unverifiable expectations of excess returns at payoff. A final implication of such practices is that they compromise the integrity of those intermediaries and companies which engage in such practices, building distrust between them and investors.

In 1999, the US Securities and Exchange Commission (SEC), made the radical suggestion that rather than focus on a catch-all definition of insider trading, markets would be better served if there were unambiguous guidelines on disclosure. This simple but revolutionary idea, which eventually came to be known as Regulation Fair Disclosure would transform US markets by removing the barriers of privilege that had denied retail investors access to company information at the same time as more endowed investors and analysts. In this post we will examine the effects on investors and companies which trade in markets with dense subterranean information networks.

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