The last I heard: A look at deal communications in Nigeria
In my first article for Street Talking, the Friday column I write in NEXT, I examine the apathetic attitudes of public companies in Nigeria to informing the investment community about the value of transactions. Historically, companies on the Nigerian Stock Exchange have performed dismally, perhaps, even irresponsibly, in communicating the merits of transactions to shareholders. However, recent events lead one to believe that the days of impunity may be drawing to a close.
Recently, Kraft Foods, the US quick serve meals giant, announced its intention to seek a merger with Cadbury, the confectionery leader. Read More…
Kraft Foods offer for Cadbury
On September 7, 2009, Kraft Foods announced its intention to pursue a $16.7 takeover of Cadbury, the confectionery company. Cadbury has rejected the offer. Read More…
That’s just the way it is. Things will never be the same again: Why the new SEC Rule 78(c) on book-building will revolutionalize issuer-investor relations in the Nigerian capital market.
The recommendations of the Dotun Suleiman Committee for the Review of Capital Market Structures and Processes have received a lot of attention in the press. As a result of public concerns over certain perceived abuses and improprieties on the Nigerian Stock Exchange, those recommendations which touch on the oversight functions of the Securities and Exchange Commission (SEC) over the exchange have been in the spotlight. However, one recommendation, so far adopted, that has received far less attention, is the introduction of book-building method in securities sales transactions. Known as Rule 78(c) it will have significant long-term impact on the Nigerian capital market through its potential to fundamentally change the content of public offering communications, structure of ownership of companies, surveillance of corporate governance, review of corporate performance and the quality of issuer-investor relations. In this post, we examine the trends that have led to the rise of institutional investors in Nigeria and why issuers may actually prefer them at first countenance. Then we discuss the likely implications of their established dominance on share registers and its implications for companies planning to raise capital.
In a recent critical essay on the dereliction of duty by US money managers in the supervision of public companies whose securities they buy and hold on behalf of private citizens, John Bogle, founder of the Vanguard Group, the giant fund manager, underlines the risks to the financial system as markets have gradually but surely transformed from owner-governed to agent-dominated systems. However, beyond his criticism of the ineluctable trend to greater ownership of corporations by fiduciaries, Bogle identifies their central role in contemporary capital markets, not simply as conduits of capital, but as watchmen of corporate governance and performance. Read More…
Now that you’ve found love what are you gonna do with it? A few ideas for African Petroleum (AP) now that it has won Public Opinion and Regulators’ vindication in the share price manipulation case against Nova Finance and Securities.
The publication of alleged evidence on the manipulation of African Petroleum’s share price against Alhaji Aliko Dangote by the board of the petroleum marketing company has brought two burning issues to the fore. First, the inability of the stock exchange to identify the actions; second, the basis for the valuation and high multiples of AP’s shares. Since the AP board’s release of Alhaji Dangote’s clearing house transaction details to support its claims, several news articles have been written, while regulators have launched investigations into the matter. The case which is shaping to be a protracted one, already has some commentators declaring African Petroleum, and specifically, Femi Otedola, its chairman, as the victor of the first round. The Securities and Exchange Commission has placed a one year suspension on Nova Finance and Securities, stock brokers to Alhaji Dangote, while Eugene Anenih, its CEO, has been banned from working in the securities industry for five years. Further, a number of shareholder associations and individual investors have condemned Alhaji Dangote in strong terms, including calling for his removal as the first vice-president of the Exchange. In the heat of the debate, particularly on such a sensitive issue, a number of opportunities are being missed by African Petroleum. If winning public opinion is the single goal of AP, that much, so far, seems a secured objective. However, by its failure to follow up with an intensive investor relations program, African Petroleum may be allowing whatever victory it has won in the court of public opinion to slip out of its hands. In this post, we argue that for companies like AP whose share prices are under assault, but whose management is convinced that the sustained and widening gap between the economic value of the firm and the market price of its shares are driven by ‘ex-analytical’ factors, it is their duty to proactively communicate the performance results and cash-generating potential of the firm. In fact, we hypothesize that failure to do so allows room for ‘bystander’ investors, not initially involved in the sell-off, to join the bandwagon, taking the silence of the firm as a signal that the current downward trending market price is the true reflection of the state of the business. We then go on to list a number of areas that AP needs to elaborate on in its investor communications. We conclude by arguing that for well run companies with solid prospects, distortions in market valuation are self-correcting, but that this process can be made quicker with a responsive, credible and robust investor relations program.
It is arguable that the decision of the board of African Petroleum to publish the trading records of Alhaji Aliko Dangote in the March 23 edition of ThisDay newspaper as supporting evidence in its claims that he was behind the aggressive crossing of its shares, without a beneficial change in ownership, over an eight week period, marks the entry into unfamiliar territory by the board of a Nigerian issuer which believes that its share price has been manipulated. According to the company, the pseudo-transactions created an appearance of active trading in its shares, when in reality there was none. Less than two weeks later, Day Spring Law Office, filed a petition on behalf of Femi Otedola, the CEO and chairman of African Petroleum, Zenon Petroleum Oil & Gas Limited and Luzon Oil & Gas Limited, seeking damages of N117,188,517,953 being the cumulative losses suffered by the petitioners for the drop in its share price from N293 on August 21, 2008 to what the petition describes as ‘a miserable N66.50 on March 26, 2008.’
Equity Research in the Age of Web by Robert Passarella.
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.
One thousand ways to say ‘I Connect’: How companies on the Nigerian Stock Exchange can use social media (1).
Within the enterprise, social media has often been too hastily dismissed as a[nother] fad and buzzword with dubious business value. We feel strongly that companies that fall into this facile categorization miss the whole point about its value. The rapid growth and utility of social media will ensure that it will become the dominant means for information distribution in the near future. It offers companies invaluable opportunities to reach stakeholders and their affinity communities in ways that were, until quite recently, simply unimaginable. In this post, we examine a number of ways in which companies on the Nigerian Stock Exchange can use social media.
What is social media? Are social media and social networks the same thing? How can companies take advantage of these new channels and platforms? Where to begin? Is social media adoption limited to a certain demographic? Is social media about communication or about interaction? What makes it so innovative? How can the success of adoption be measured? We provide answers and guideposts to these.
Why do Nigerian companies neglect transaction value communications: A critical look at the aborted Zenon-AP merger and Bank PHB-Spring Bank acquisition.
In the four year period from January 2005 to January 2009 , the value of M&A transactions in Nigeria has far exceeded the total value of such transactions in the prior 20 year period. Yet, the content and quality of communications on the compelling reasons for a deal remains dismal. The recent cases of the aborted Zenon Petroleum & Gas - African Petroleum merger and the Bank PHB acquisition of Spring Bank provides classic studies on the attitudes of Nigerian companies to deal communications.
At the annual general meeting of African Petroleum (AP) held on April 28, 2008, shareholders overwhelmingly approved the merger of their company with Zenon Petroleum and Gas Limited, whose chairman, Femi Otedola, controlled over 50% of the company’s shares.
Most Corporate Blogs are unimaginative failures.
According to Forrester Research’s findings, most corporate blogs don’t achieve their goals (‘dull, drab, and don’t stimulate discussion’). In its report, the WSJ provoked an interesting debate in the Comments area, with both viscerally pro and rabidly con positions. Read More…
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