New owners of Mobil Oil Nigeria Ltd, NIPCO Ltd, launched a Mandatory Take Over Bid for the shares of Mobil earlier this week. NIPCO announced that in exchange for the bid, they will pay the remaining shareholders of Mobil, a share price of N417.12.
A cross-section of retail investors are however, concerned about other details of the MTO which can be seen below. Key among the contentious portions of the offer is the cut-off period of April 10, 2017
According to NIPCO, the share price of N417.2 will only be paid to shareholders who are in the shareholding register of Mobil as at April 10, 2017. This means that investors who bought Mobil Shares on the floor of the NSE after that date will not be offered a purchase consideration at a price of N417.2.
Based on this, the incentive to keep the shares will be lost, at least in the interim affecting the short-term value of the stock. Mobil share price fell on Friday.
Implication: As soon as investors got wind of this information, bids for Mobil dropped thus affecting the momentum of the bulls. Investors had anticipated a bull run that could take the share price to at least its five years high of N360, implying a 20-30% upside. The share price has failed to gain steam since the announcement was made.
What’s wrong with the cutoff period?
Investors who spoke to Nairametrics reveal that the cutoff period came as a surprise and would want SEC to call NIPCO to order. Their contention is that, why place a cutoff period retrospectively rather than at a date after the confirmation of an MTO.
In a market where retail investors are suspicious of insider information, the impression this creates is that fair play has been shoved aside for information asymmetry as those who knew about this cut-off date may have positioned themselves long before when Mobil traded below N300.
The expectation was that a cut-off period would at least be announced at a date later than the date the MTO was officially communicated rather than retrospectively. Nevertheless, Nairametrics did report in December that an MTO was impending which suggest a remarkable upside for investors who buy to hold.
Another investor opined that the marked down date for payment of dividend by Mobil was between April 28 to May 1 and wonders why cut-off date for an MTO should be earlier. “Are they saying that shareholders who officially earned dividend cannot also qualify to get an offer price of N417.2. Do we now have shareholders with different privileges?” We also understand that some shareholders who do not qualify are already exploring legal options to redress the situation.
Those who qualify to accept this offer will have to fill an MTO form. The application opened on May 30th, 2017 and will close on June 29, 2017. Mobil Oil Nigeria Plc share price closed lower on Friday at N285.86