The Nigerian Stock Exchange (NSE) has launched a process to amend its listing requirements to enhance price discovery and liquidity for new listed securities and protect investors from supply-driven price manipulation and misinformation.
Under the proposed amendment, undergoing rule-making process, companies seeking to list by way of introduction or any other method at the Exchange must make available shares or securities for trading on the day of listing as well as provide the investing public with updated financial statements and other material information.
Listing by introduction is a method of listing where the company making initial listing of its shares has no subsisting offering of its shares or securities to investors and no additional capital is being raised from the market at the time of listing.
The proposed amendment comes on the heels of intense concerns generated by the listing by introduction of MTN Communications Nigeria Plc, with several analysts attributing the steep rise in the share price of the telecommunications company to non-supply of shares.
Under the arrangement, a company listing by introduction is not required to provide any shares for trading, raising concerns about possibility of manipulation of initial demand for shares without supply as pretense for a price rally.
According to the proposed amendments, on the day of listing of equity securities excluding public offerings, the company shall make available for trading a sufficient amount, but not less than 10 million shares or units or one per cent of its outstanding shares, whichever is greater, or such volume or value of shares as may be determined by the Exchange.
Also, each company seeking to list its securities on the Exchange shall publish the approved information memorandum or the listing prospectus approved by the Securities and Exchange Commission (SEC) as well as its latest audited and unaudited financial statements, which shall not be more than nine months old.
Such company will be required to publish the information on its website not later than 48 hours before the listing date and also on the NSE’s Issuers’ Portal not later than 48 hours after being listed on the Exchange.
NSE Executive Director, Regulation, Tinuade Awe said the proposed amendments were to address concerns about availability of shares for trading on the day a company is listed by introduction.
According to her, the proposed amendments will provide a clearer description of listing by introduction and impose an obligation on prospective issuers of equity securities -excluding public offerings, to make a reasonable volume of shares available for trading on the day of listing.
She added that the proposed rules would address concerns for sufficient information about a listing company’s financial position on the day of listing in order to give prospective investors a basis for trading in the company’s shares.
“Consequently, additional amendments are being proposed to ensure that issuers provide their information memorandum or SEC-approved prospectus, as well as their latest financial statements to the market by publishing same on their websites at least 48 hours before the listing, to enable investors to make informed investment decisions regarding the issuer,” Awe stated.
