Concerns rise over spate of voluntary delisting on NSE
…17 companies chose to exit in 16 years
The spate at which companies listed on the Nigerian Stock Exchange (NSE) opt to voluntarily exit the Exchange is now a source of concern, particularly at a time when the bourse is in need of new listings.
A company’s name ceases to exist on the Daily Official List of the Nigerian Stock Exchange due to decisions that are most times voluntary, regulatory or as a result of Mergers & Acquisitions (M&AS).
The term “delisting” of securities means removal of listed securities from the Exchange. The securities of an affected Issuer will no longer be traded on the Exchange and the Issuer’s name will be removed from the Daily Official List of the Exchange.
Businessday recent check shows that from 2002 to 2018, no fewer than 17 companies earlier listed on the NSE chose to voluntarily delist. This is in addition to many others that were regulatory-induced or due to their M&A consummation.
Our check shows that 13 out of the total companies that voluntarily delisted, representing 76.4 percent, voluntarily chose to be delisted from the Daily Official List of the Exchange between 2011 and 2018.
“Delisting tends to reduce the universe of liquid shares, thereby affecting the depth and breadth of the stock market, especially if there are no new listings,” Douglas Muyeche, a finance lecturer at the National University of Science and Technology, Bulawayo, Zimbabwe, said in a recent note.
“Inasmuch as most delisting(s) are involuntary, there are good reasons for a counter to opt for voluntary delisting in light of enhancing shareholder value. The cost of remaining public versus the cost of going private has been cited as the most determinant factor in voluntary delisting,” Muyeche said.
Another notable reason he gave for companies’ voluntary delisting is the inability to raise equity capital by the listed firm, “owing to a relatively lower share price compared to the real net asset value of the firm”.
“The need to merge, demerge or restructure a firm may be drivers of voluntary delisting,” he said.
Oscar Onyema, CEO, NSE, assumed office on April 4, 2011. He will today, Monday, January 14, 2019 lead other management staff of the Exchange to present the 2018 market recap and 2019 outlook.
Voluntary delisting is the withdrawal of an Issuer’s securities listed on the Exchange with the express approval of the holders of its securities, after complying with relevant requirements in that regard.