by Taofik Salako
Institutional and individual major investors are selling their shareholdings to cushion the effects of the recession and cash crunch The Nation has learnt.
Transactional documents on recent major sales showed that many institutional investors are increasingly turning to the stock market to source for funds through secondary shares sale to bridge finance gaps.
Reliable market sources confirmed the shares sale by major investors.
In one of the transactions, a commercial bank, with headquarters in Lekki, Lagos State, sold its major stake in Nigeria’s main securities depository and clearing company, Central Securities and Clearing System (CSCS) to a United Kingdom-based investment firm in a deal that raised more than N1billion. The transaction raised the UK’s investment firm and strengthened its position as the second largest shareholder in the CSCS, following that of the Nigerian Stock Exchange (NSE).
CSCS, incorporated in 1992, is the depository and clearing and settlement company for the stock market. The company operates a computerised depository, clearing, settlement and delivery system for transactions in shares and other securities listed on the NSE and the NASD OTC.
Six major shareholders, including the NSE, four commercial banks and the UK-based firm, held the majority shareholdings of 62.35 per cent. The latest transaction, from a major shareholder with less than five per cent equity stake, added about three per cent equity stake to the majority shareholding of the UK-based firm, thereby increasing the group-of-six’s controlling equity stake to about 65.4 per cent equity stake, leaving the sundry retail investors with 34.6 per cent equity stake.
In another deal, a Falomo, Ikoyi, Lagos group with investments in industrial and consumer goods, sold a major stake in the upstream company, Seplat Petroleum Development Company PLC, in a transaction described as indirect fund raising.
The group, with many foreign subsidiaries, has repeatedly complained of the financial crunch engendered by the foreign exchange crisis, which has limited primary capital raising activities.
Market sources said many investors were selling off or selling down their shareholdings to offset accruing liabilities or buoy up their businesses in the face of the tight economic situation.
The sources, who craved anonymity because of transactional rules, said institutional investors were, in many instances, being forced to sell to boost their liquidity and stave off financial pressure, citing a Lagos-based insurance company that had to cut initial price for a special placement by 50 per cent to attract a major investor.
Market sources said the increasing selling pressure from major institutional investors has compounded the pressure hitherto from retail minority investors, who had turned to monetising their shareholdings to raise funds.
Market sources said the selloff has substantially undervalued most Nigerian companies and could expose them to the risk of aggressive foreign acquisitions.
Against most analysts, the stock market has come under intense selling pressure this quarter. With inflation satnding at 18.33 per cent and average year-to-date return at the stock market at -10.9 per cent, inflation-adjusted return at the stock market has plummeted to -29.2 per cent. Major companies in the banking, oil and gas, consumer goods and industrial goods sectors have performed below average.
Quoted companies on the NSE lost N218 billion in market values last week in all-week negative trading sessions that brought the market down to its lowest point in the past five months