With the positive signs witnessed recently in the stock market, raising the hope that this year may set the market on a gradual recovery path, investors have stressed the need for regulators to reinforce engagements with listed firms, and ascertain areas of possible interventions to reduce irregularities and subsequent delisting from the market.
Indeed, report from the Nigerian Stock Exchange (NSE), showed that among the 77 companies delisted from its daily official list in the last 10 years, 2006 to May 2016, about 54 were delisted due to regulatory instruction, while others cited harsh economic climate and parent company buy-out as reasons.
Delisting is the process by which a listed security is removed from the exchange on which it trades. Here, a company can voluntarily ask to be delisted to become privately traded; otherwise, a particular stock may be removed from an exchange because the company for which the stock is issued fail to comply with the listing requirements of the exchange.
Investors, who spoke in a telephone interview with The Guardian, criticised the regulatory action, describing it as a disincentive and inimical to market growth.
They argued that firms’ exiting the market voluntarily or by regulatory instructions sends wrong signals to institutional and foreign investors about the fundamentals of the listed firms and the integrity of the stock market.
Furthermore, they pointed out that investors are worst hit whenever regulators ‘wield the big stick’, noting that it compounds retail investors’ woes, as they are usually left to the ‘whims and caprices’ of the companies’ managers since the shares are no longer tradable. This, according to them erodes investors’ confidence.
The investors, who also decried the huge investment losses they have suffered over the years investing in the stock market, urged regulators to make transaction charges cheaper and more attractive for non-listed firms in Nigeria.
They suggested that for the market to maintain the gradual rally witnessed presently, regulators must consult with the board of these listed firms on the necessary interventions measures that could help revive the companies and return them to profitability.
More so, they added that regulators should allow those listed companies that are no longer meeting the post-listing requirements to remain a ‘public focus’, as institutional investors may develop interest in such companies and decide to stake their fund in them.
The stock market, which opened the year on a negative note, has made a gain of N2.205 trillion for the first half of 2017. The Nigerian Stock Exchange All Share Index (NSEASI), which measures the performance of the equity market, appreciated by 6,242.86 points to close at 33,117.48 on June 30, from 26,874.62 at which it opened for the year.
Similarly, market capitalisation gained N2.205trillion, up from N9.247trillion at which it opened trading on January 3, 2017 to close at N11.452trillion in the half-year.
Market analysts opined that the apex bank monetary and foreign exchange policies so far in the year have been a major driver of the economic recovery through its intervention in the forex market. These have helped revamp the manufacturing and other sectors productivities by meeting the supply side of the market to relatively stabilised exchange rate that supported naira appreciation.
The President, Renaissance Shareholders Association, Olufemi Timothy, urged the NSE to avoid actions that could affect the gradual appreciation witnessed currently in the market, but instead, urged regulators to make the market more attractive so that listed firms would have the choice to remain the market.
“If companies do not get value for their stay in the market, they will exit. The regulators must make the market add value to these firms. Take for instance; if companies are not meeting post-listing requirements, the regulators should engage them to find out those factors that are affecting their operations not delisting them.
“Also, charges should be reduced, the issue of penalty is also scaring companies away. Due to low investors’ penetration, companies are finding it difficult to raise money, so regulators should find a way of addressing all these issues so that listed firms would derive value for listing on the Exchange and issues of delisting may not arise.”
The Chairman, Dynamic Shareholders Association, Alex Adio, said investors’ confidence is dwindling as a result of delisting of companies.
“Most reason for delisting cannot be substantiated by the regulators. When companies are delisted and all assets go down the drain. Our regulators must be regulated as in developed countries.
“Some are genuinely delisted. Some fraudulently delisted for frivolous reason. Some to bail out from multiple taxation, unfavourable policies of regulators and easy way to ease out retail investors from accrued benefit by few,” he added.
The National Coordinator of Proactive Shareholders Association, Taiwo Oderinde, urged regulators to pursue vigorously, the promotion and sponsorship of bills that would encourage listing of more companies in the National Assembly (NASS) instead of delisting the already listed ones.
“I believe a market should be for free entry and exit but in the case of our capital market, it is turning to another thing entirely. The Research and Development departments of our SEC and NSE should identify the root causes to address it immediately. Also, they need to find out from other climes what our market is lacking thereby eroding stakeholders’ interest.
“For example, there is a need for the introduction of tax holiday for quoted companies, and introduction of incentives to attract unquoted ones instead of delisting.”
The NSE said listed companies signed to comply with post-listing rules of the Exchange, which specified that any breach attracts sanction, and has had several engagements with companies before considering delisting them.
“Listed companies have post listing requirement they need to comply with. The Exchange took a step on how to assist some of these companies.”
They include “Facts behind restructuring” which gives companies the opportunity to explain their situation to market operators and investors.