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UBA share cancellation explained….. but questions remain

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United Bank of Africa, (UBA), announced earlier in the week that it had obtained shareholder approval to cancel over 2 billion ordinary shares held in trust for its Staff Share Investment Trust. An article from Nairametrics suggested the transaction could result in a cash windfall for the Trust as a cancellation of the shares implied a corresponding reduction in cash or share capital.

Contrary to our earlier opinion, some of our analysts have clarified some of the issues surrounding the cancellation of the shares.  According to our sources, no cash will exchange hands in the deal, as the shares in question were not held by any staff member of the bank but rather held in trust for staff who could potentially own it. Thus, it can’t be termed a buy back.

Explanation

Staff Share Investment Trust (SSIT)

The Staff Share Investment Trust is a scheme setup in the Standard Trust Bank days (STB) and was used to hold shares in STB on behalf of staff. The bank at the time used it as a reward to their staff who have met defined performance benchmarks.

For example, a company looking to reward its employees can do so in a number of ways. It can decide to pay its staff bonuses, give them long service awards, send them on all expense paid vacations, buy them gifts or as in this case, offer them shares in the company.

Startups, (as STB was at the time) typically offer their earliest employees equity in their company in exchange for loyalty or consideration. However, before this shares is vested , the employees must achieve the set performance benchmarks.

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Vesting, is a financial term for transferring or bestowing an asset to someone or an entity after a condition may have been met within a stipulated period. In this vein the shares was never transferred but held in trust for the shareholders

UBA is therefore saying that the over 2 billion shares they are cancelling represents shares that they had purchased on behalf of staffs and would have transferred it (vested it) to them had they met performance metrics. Cancelling the shares now suggest, those metrics were probably not met and as such will now be “repossessed” by the bank.

We however understand that the remaining portion of the shares held in trust and amounting to about 151 million units is unaffected by this move.

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Will cash be paid in lieu of the share cancellation

UBA carefully used the word “repossessed” in explaining their actions insisting that this transaction was not going to cost the bank a kobo. According to them, since they had already paid for this shares in the past and have now decided not to transfer it to employees, they are simply taking it back. Also, since Nigerian laws does not permit companies to hold their own shares, they will have to cancel it.

Unanswered Questions remain

Despite the robust explanations by the bank, a few pertinent questions remain unanswered. Figures from the 2016 annual report of the bank show the Earnings Per Share was calculated using 34,054,857,094 shares, excluding the shares held by the SSIT.

Dividend per share is however calculated using 36,279,526,321 shares which including the shares held by the staff investment trust.

Put simply, the bank has used two different outstanding share figures to calculate earnings and dividend per share respectively. In addition. the bank’s balance sheet does not contain any entry in respect of the dividends and bonuses accruing to shares held under the trust. As the confusion rages, the bank has maintained silence in the midst of a lack of transparency. Emails to the bank’s investor relations unit have not been replied, as at the time of posting this story.

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Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via [email protected]

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Companies

NB Plc to raise additional N20 billion from its N100 billion Commercial Paper

Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme.

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dividend, Nigerian Breweries reports reduced profits for first three quarters of 2019 , Analysis: Nigeria Breweries, the glory days are gone, Nigerian Breweries to raise additional N20 billion from its N100 billion CP programme

Nigerian Breweries has announced the continuation of its N100 billion Commercial Paper (CP) Issuance Programme in a bid to raise up to N20 billion to support its short term funding needs. The company has launched Series 9 and 10 of the programme for this purpose.

This information was disclosed in a notification signed by the Company’s Secretary, Uaboi G. Agbebaku, and sent to the Nigerian Stock Exchange.

The notification reads;

“[Nigerian Breweries Plc] is pleased to inform the Nigerian Stock Exchange and the investing public of the continuation of its “CP” (Commercial Paper) programme with the launch of Series 9 and 10 of the programme.

“Series 9 of the Commercial Paper programme would be for a tenor of 180 days, while Series 10 would be for 270 days. However, the launch of the CP opens today 23rd October 2020.”

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(READ MORE:Nigerian Breweries stock up by 58% since August )

What you should know

According to data obtained from Financial Market Dealers Quote (FMDQ), Nigerian Breweries has raised up to N90.12 billion since the start of the year.

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  • N52.76 billion was raised from Series 6 between February 12 to November 6, 2020.
  • N13.03 billion was raised from Series 7 from April 15 to October 14, 2020.
  • N24.33 billion was raised from Series 8 from April 15 to January 8, 2021.
  • The recent issuance of the Series 9 and 10 CP will bring the total funds raised to N110.12 billion.

Why it matters

  • The CP will help the company navigate through the recent impact of COVID-19 and other trade disruptions.
  • The programme will strengthen the balance sheet of the company, and enable the brewer to execute its plans while delivering value to customers and creating wealth for shareholders,
  • In like manner, the CP programme is expected to provide opportunities for non-equity investors to invest in the company and support its cost management initiatives.

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Companies

MTN shareholders have made approximately N1 trillion since April 2020

Shareholders of MTN Nigeria gained close to a trillion naira in less than 7 months.

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MTN Nigeria, MTN Nigeria Communications Plc. begins N100 billion commercial paper issuance today

MTN Nigeria shareholders have gained N986.58 billion since the first trading session in April 2020.

This was uncovered by calculating the difference in the telecommunication giant’s market capitalization of ₦1.832 trillion at the open of trade, for the first trading session in the month of April 2020, and the market capitalization of ₦2.646 trillion at the close of trade in the first trading session in the month of October.

READ: Shell to cut 9,000 jobs globally due to oil price crash as it shifts to clean energy

This gives a whopping N814 billion increase in market capitalization, and this with the dividend the company has paid to shareholders on two occasions between this time period, brings the total gains both realized and unrealized to approximately N1 trillion.

READ: FUGAZ; Nigerian banks considered too big to fail

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Hence, the N814 billion increase in market capitalization translates to the joint gains MTN investors have made from the increase in the shares of the company, as the share price of the company has increased by 44.44% or ₦40.00 between April 1, 2020, and October 2, 2020, with the share price of increasing from ₦90.00 to ₦130.00.

However, the gains MTN NG investors have made from their investments in the telecommunication company, is not limited to the gains driven by the increase in the price of the shares.

READ: World Bank says Nigerian banks are at risk of being destabilised by COVID-19

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Recall that the company declared payment of dividends to its shareholders on two occasions, as investors/shareholders of the company, whose names appear in the Register of Members, as of the close of business on April 17, 2020 and August 14, 2020 were paid a cumulative dividend per share of ₦8.47, for all the outstanding shares of 20,354,513,050 held by the shareholders, and this translates to a total dividend payout of N171 billion by the company to its shareholders.

It is noteworthy that the realized and unrealized gains MTN investors have made from holding the shares over this period stands at N986.58 billion.

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Companies

LASACO Assurance Plc Chairman, Aderinola Disu resigns from the Board of Directors

Aderinola Disu resigned her position as a Director on the Board of LASACO Assurance.

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Lasaco Assurance

Lasaco Assurance Plc has announced the resignation of its former Chairman, Mrs. Aderinola Disu, as a Director on the Board. The resignation took effect from the 8th of September, 2020.

The following information is contained in a press release made available to the public, signed by the company Secretary, Gertrude Olutekunbi, and verified by Nairametrics.

The notification also revealed that, the aforementioned firm has received a provisional approval from the National Insurance Commission (NAICOM) to appoint two other directors.

READ: 3 bank directors resign from NESG in protest to CBN immunity letter

The two newly appointed directors are; Dr (Mrs.) Maria Olateju Phillips, and Prince Jamiu Adio Saka, both appointed to a Non-Executive Director role.

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Profile of the two newly appointed Directors

Chief (Mrs.) Teju Phillips, is a successful Chartered Accountant, who holds an ACCA from England and Wales. She is multilingual and has extensive experience in Management/Consultancy services, that spans across many years in both the public and private sectors. She has served as a Director in Keystone Bank; Director, Lagos State Lottery Board; Honorable Commissioner for Special Duties & Inter-Governmental Relations in Lagos State; Managing Director of Alma Beach Estate Ltd (a subsidiary of Rims Merchant Bank Ltd); Managing Director, Maridot Ventures Ltd. among others.

READ: FIRS retires coordinating directors, appoints new ones

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Prince Jamiu Adio Saka, is an accomplished Insurance professional, having practiced in Canada and Nigeria. He brings to the board over 30 years of experience as a Broker.

Lasaco Assurance Plc, is a listed Nigerian firm that provides life and general insurance services, which includes motor, bond, contractors-all-risk, fire, burglary, aviation, marine, general accident, life, pension schemes, engineering, and oil and gas. The company has a market capitalization of about N2.05 billion and it share price currently trades at N0.28 kobo.

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