Why MTN Shares Are Scarce – Stock Exchange

The Nigerian Stock Exchange (NSE ) on Tuesday clarified issues concerning the scarcity of shares of the telecommunications giant, MTN on the floor of the exchange.

MTN shares were last week introduced into the exchange at N90 a share. On Monday morning the shares closed at N119.75 after three days of trading.

There have, however, been speculations that the company may have limited the number of shares introduced into the stock exchange. The company was compelled by the terms of settlement with the Federal Government arising from its sale of unregistered sim cards to list its shares on the country’s stock exchange following years of muttering by Nigerians that the South African owned company was not interested in putting Nigerians into its ownership structure.

But reacting to the scarcity of the company’s shares in a statement issued by the Nigerian Stock Exchange, on Monday, the bourse said:

“Attention has been drawn to a few critical issues raised in various print and social media platforms regarding the listing of MTN Nigeria Communications Plc (MTN Nigeria) on the Premium Board of the Exchange.  As an Exchange that is committed to operating a fair, orderly and transparent market, we deem it important to clarify these issues.”
“Where a company lists following an Initial Public Offering, shares are expected to be available for trading on the day of listing.  In a Listing by Introduction, however, no shares have been offered for subscription by the company prior to listing. 

“Thus, without any intervention, it is possible that there will be no shares available for trading on the listing date. Indeed, currently, no rule of the Exchange compels shareholders in a listed company to tender their shares for trading.  Shareholders are at liberty to trade their shares at any time and price suitable to them.  

“Thus, in order to stimulate trading in the shares of companies that List by Introduction, the NSE’s practice is to urge the company to make shares available on the day of listing.  In the case of MTN Nigeria, the NSE had requested the Company as part of the listing process to make shares available and the Exchange expects the company to do that.”

“Since the listing of MTN Nigeria on Thursday, May 16, 2019, a total of 105,301,759 shares valued at N12,231,997,316 have traded in three (3) days. These trades were carried out by ten (10) Dealing Member Firms in 134 cross deals/negotiated deals. “
 “According to the Rulebook of The Exchange, when a Dealing Member or Authorized Clerk has an order to buy and an order to sell the same security at the same price, the Dealing Member or Authorized Clerk may “cross” those orders at a price at or within The Exchange’s best bid or offer.  A variant of this is the negotiated deal, which describes a situation where a cross deal is executed between two Dealing Member Firms at a price which may be within the Exchange’s best bid or offer or with the approval of the Exchange, outside the best  bid or offer.  Because cross deals involve clients of the same Dealing Member Firm on both sides of a trade, significant issues have been raised that Dealing Members who have not been involved in the cross deals have been unable to trade on behalf of their clients.  The Exchange is not unconcerned about this state of affairs.  Indeed, Council members of the Exchange urged brokers to discuss with their clients about possible sales of shares.”

” As an Exchange that champions transparency and equity for all stakeholders in our market, we have received stakeholder feedback concerning our present rules on cross dealing and will consider the issues raised as part of our sustained efforts to ensure our market remains equitable for all stakeholders. We believe in market forces as the most efficient methodology for price discovery.  Demand and supply will interact to discover appropriate prices as trading activities continue in the market.” 

“There appears to be a misconception that a concession was given to MTN Nigeria on the minimum free float required for companies listed on The Exchange. According to Rulebook of The Exchange, free float is defined as the number of shares that an Issuer has outstanding and available to be traded on The Exchange. It includes all shares held by the investing public, and excludes shares held directly or indirectly by promoters, directors and their close relatives; strategic investors holding five percent (5%) and above of the issued share capital; or government.”

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