Though the Nigerian Stock Exchange is right, delisting the companies will hurt many investors and indeed, the economy
The management of the Nigerian Stock Exchange (NSE) recently indicated its intention to delist 21 companies for failure to comply with post-listing requirements. According to the NSE, the affected companies have already been given a three-month statutory notice to comply or be delisted. The notice is in order because, like every game with its rules, listing on the exchange has requirements that must be followed. Also, the NSE’s action is part of efforts to instil discipline among listing companies and ensure high standards in the market.
Some of the companies affected by the notice include G. Cappa Plc, UTC Nigeria Plc, Nigeria Wire and Cable Plc, Starcomms and Daar Communication Plc, while the charge against them is the failure to file quarterly and annual financial statements as required under the listing rules of the NSE. In a similar vein, five companies including Stockvis Plc, Nigeria Sewing Machine and Jos International Breweries Plc, are to be delisted for failure to regularise their listing status after being given time to do so.
However, while we do not query the rationale for the decision, there is the need for the NSE management to tread with caution for some reasons. First, since the crash of the market in 2008, all stakeholders have been striving to attract more companies and investors to the market with little success. Indeed, between 2008 and now, only about six new companies have been listed. It would therefore, be counter-productive to delist these companies at the same time not only because investors may lose their investments, the action could dampen the confidence of many prospective issuers. Indeed, some shareholders have accused the NSE of being insensitive to the contribution of retail investors to the nation’s economy. “The NSE has failed to protect the interest of retail and minority shareholders which contributes to loss of confidence in the equities market”, said Sunny Nwosu, National Coordinator of the Independent Shareholders Association of Nigeria (ISAN).
Second, companies access the market for funds to grow their business and earn returns on their investments. No company would deliberately refuse to comply with post-listing requirements considering the many advantages that come with being quoted on the NSE. A deep look at some of the affected companies would reveal that their inability to comply could be due to the difficult operating environment. Many of them are certainly not in operations due perhaps to challenges imposed on them by the poor infrastructure and lack of finance.
Therefore, instead of delisting the companies, it would be a better option for the NSE to investigate those companies, find out the challenges they are facing and assist them with expertise from its listing and retention department. By adopting that approach, confidence would be built among the promoters of the companies, shareholders and other stakeholders. This is also capable of attracting fresh listings and new investors.
Third, rather than NSE waiting for the last option of delisting, it should develop a new strategy of alerting shareholders of any company that shows signs of irregular compliance. The NSE has access to more information about those companies than the shareholders who wait until the annual general meeting to get information. It will be more proactive for the management of the exchange to always call the attention of shareholders of any company failing in its post-listing commitments. The NSE should not only be more concerned about its listing fees to the detriment of investors.
The NSE management should work with directors and shareholders of companies in order to find solution to the challenges of the companies. When this is done, the investors would not lose their investments, directors would remain in business and the NSE will receive its listing fees and continue to play its role of wealth formation and distribution in the economy.
