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Business News

This is ‘MESA’; Milost strategy for investing in Nigeria

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The Founder of Milost Global Mandla J. Gawdiso unpacked MESA an instrument which it wants to deploy to investing in Nigeria. MESA which is an acronym for Milost Equity Subscription Agreement is a creation of Gawdiso and is a hybrid of debt and equity.

According to the press release seen by Nairametrics (see below), the instrument is aimed at funding “undervalued publicly quoted companies all around the world.” Here is a summary of what MESA is about;

  • It’s a hybrid of debt and equity

  • Milost gives a company cash in exchange for equity at a 50% premium to the market price of the stock.

  • For example, if Japaul is trading at N1, Miost will buy it for N1.50

  • If the share price drops below N1.50, the company, Japaul, for example, will pay Milost the difference between the N1 and the N1.50 in more equity such that Milost value will rise back to N1.50. Japula does not need to pay cash, just issue more equity.

  • The company will also pay Milost 10% – 20% discount to the 5 days Volume Weighted Average Price (VWAP) as a penalty

  • According to Milost the cash given to the company as equity can only be used as working capital while debt can only be used to acquire cash-generating assets.

  • Milost called MESA “the Messiah of growth and the impartial arbiter of stock and value disparities.”

According to Gawdiso, the idea behind MESA is that they help a company cash in on its intrinsic value rather than its market value, assuming that the former is higher than the latter. For example, a stock of Company A can be trading at N5 per share even though the company may believe it is actually worth N7. They will then issue equity at the price of the N7 instead of N5, hoping that this will eventually get the market to price it at its intrinsic value.

We do not know for sure how this instrument will work in Nigeria especially for companies with significant minority shareholdings. Does this law also allow for an equity holder of a quoted company get compensation for loss of value of the stock at the expense of other shareholders? Also, will the shares issued to Milost come from the unauthorized share capital or will it be from existing shares?

Milost Global has taken the investing community off guard with its announcement that it intends to invest billions of naira in companies that had been either left for dead or close to being dead. Critics have questioned their investment capabilities and wondered if indeed they can stump up the billions of dollars in investments being brandished.

This press release appears to be a response to some of these criticisms.

Interesting to note that Gawdiso is actually quite active on Twitter. See his handle below;

https://twitter.com/mj_gwadiso?lang=en

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Find below, the full copy of the press release;

NB: The press release had some dodgy grammar not typically associated with such releases.


NEW YORK, March 20, 2018 (GLOBE NEWSWIRE) — Milost Global, Inc. (“Milost”) a New York based private equity firm in partnership with Japaul Oil & Maritime Services PLC, Resort Savings and Loans Plc, Femab Properties Ltd, Primewaterview Holdings Ltd is pleased to present the Milost Equity Subscription Agreement (“MESA”) to the Nigerian market. The global public markets are crowded by toxic investment instruments that have and continue to impede growth for public companies. This has led to excessive bleeding for shareholders as these companies’ market valuations continue to be depressed and thereby very inconsistent with their intrinsic valuations. This led to the design and creation of the MESA.

MESA

The MESA is a global investment instrument that was designed by Mandla J. Gwadiso from 2009 until 2014. It is a combo of debt and equity facility that is aimed at funding undervalued publicly quoted companies all around the world. The instrument strategically targets companies that trade at a minimum of 50% discount to their intrinsic value. The instrument invests at a premium of 50% to market and pegs the performance of the stock over a period of 90 business days. If the stock doesn’t hit the high agreed at the set time frame, the difference is defrayed in extra stock. Take for instance, if the stock is trading at $1 per share in a 5 VWAP, the MESA would buy the stock at $1.50 per share and peg the performance thereof over 90 days. In 90 days, the MESA would look at the performance thereof over such period, if the stock trades at or above the $1.50 premium price at which the investor had purchased the stock, there would be no extra shares issued to the investor and if the stock price performed poorly and had not reached the purchase price then the difference between the 5 day VWAP of $1 and the premium purchase price of $1.50 would be paid by the Company to the investor in extra stock.

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If the stock failed to reach the premium purchase price, the Company would also pay a penalty of 10 to 20% discount to the 5 day VWAP for failing to reach the high agreed price at which the investor had purchased the stock. The MESA is a growth instrument that creates and builds confidence in the stock of the companies in which it invests, as it invests at 50% premium to the market. Since the MESA is a funding facility, the companies can’t draw down the entire committed capital in one tranche. The MESA is a 3 to 5-year facility that a Company can draw down against from time to time over such period. The Company decides how much and when to draw down, thereby allowing the company the flexibility to draw down equity when the stock price is favourable to the Company so as to ensure a well-managed structure of dilution of current shareholders for each equity draw down. Equity draw down proceeds are used strictly for working capital, whereas note draw down proceeds are strictly used to fund growth through acquisitions of cash-flow positive assets or organic growth. At no time during the term of the MESA can a Company draw down more than 51% of its market capitalization and the draw downs are not tied to stock liquidity as Milost is a growth investor that only exits after 7 to 9 years after the time of investment.

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The MESA is one of the most effective investment instruments because it causes the market to correct the valuation of the stock in sync with the Company’s intrinsic value. Unlike other instruments that are mostly used by hedge funds, the MESA is value instrument that is designed to only exit investments after 7 to 9 years from the time of investment. In a nutshell, the MESA never trades its equity positions in the market.

“The MESA is the Messiah of growth and the impartial arbiter of stock and value disparities.”

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By Mandla J. Gawdiso.

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

1 Comment

1 Comment

  1. Ayomide

    March 21, 2018 at 9:54 am

    What happens if the stock price falls after the 90 days period? Will the companies still pay for the fall?

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Energy

Nigeria breaks transmission record again, hitting 5,801.60 MW

The TCN has broken its own transmission record three times in the space of a week.

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FG set to create at least 5 million jobs for youths in the power sector – Minister of Power , Consortium of Western investors to inject upwards of $5 billion in Nigeria's renewable energy sector, Power: Nigeria's deal with Siemens - the birth of a new era?

The Transmission Company of Nigeria announced another record, as grid transmission hits a peak of  5801.60 MW.

This was disclosed by the Minister of Power, Engineer Sale Mamman in a statement on Tuesday evening.

“Back-to-Back Peak Transmission, Yesterday, 1st of March at 9:30 pm, we hit a new HIGH,” he said.

He added that 5801.60 MW transmitted at a frequency of 50.09 hz.

“Next Level heights for the Power Sector. Kudos to all at the TCN & MoP striving towards stable energy for Nigerians,” he added.

In case you missed it 

  • Nairametrics reported yesterday that the Transmission Company of Nigeria (TCN) announced that it hit another record milestone on transmission, as it recorded a national peak of 5,615.40MW.
  • On March 1st that the TCN announced it has broken its transmission record once again, after hitting a record of 5,584.40 MW.

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Coronavirus

COVID-19 Update in Nigeria

On the 2nd of March 2021, 479 new confirmed cases and 8 deaths were recorded in Nigeria

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Covid 19 update symptops

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 156,496 confirmed cases.

On the 2nd of March 2021, 479 new confirmed cases and 8 deaths were recorded in Nigeria.

To date, 156,496 cases have been confirmed, 134,551 cases have been discharged and 1,923 deaths have been recorded in 36 states and the Federal Capital Territory.

A total of 1.54 million tests have been carried out as of March 2nd, 2021 compared to 1.49 million tests a day earlier.

COVID-19 Case Updates- 2nd March 2021,

  • Total Number of Cases – 156,496
  • Total Number Discharged – 135,136
  • Total Deaths – 1,923
  • Total Tests Carried out – 1,544,008

According to the NCDC, the 479 new cases are reported from 22 states- Lagos (153), Enugu (75), Rivers (50), FCT (40), Kaduna (18), Ebonyi (17), Plateau (17), Edo (17), Borno (16), Oyo (12) Kano (11), Abia (10), Cross River (10), Taraba (9), Nasarawa (7), Bauchi (4), Bayelsa (3), Delta (3), Ekiti (2), Niger (2), Ogun (2) and Akwa Ibom (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 56,001, followed by Abuja (19,274), Plateau (8,911), Kaduna (8,531),  Oyo (6,746), Rivers (6,544), Edo (4,607), Ogun (4,398), Kano (3,764), Ondo (2,983), Kwara (2,931), Delta (2,576), Osun (2,433), Nasarawa (2,234), Enugu (2,078), Gombe (2,051), Katsina (2,030), Ebonyi (1,881), Anambra (1,726), and Abia (1,530).

Akwa Ibom has recorded 1,519 cases, Imo (1,497), Borno (1,292), Bauchi (1,232), Benue (1,188), Niger (917), Taraba (813), Ekiti (804), Bayelsa (772), Sokoto (769), Adamawa (762), Jigawa (496), Kebbi (377), Cross River (334), Yobe (268), Zamfara (219), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

Governor Babajide Sanwo-Olu of Lagos State announced the closed down of the Eti-Osa Isolation Centre, with effect from Friday, 31st July 2020. He also mentioned that the Agidingbi Isolation Centre would also be closed and the patients relocated to a large capacity centre.

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Due to the increased number of covid-19 cases in Nigeria, the Nigerian government ordered the reopening of Isolation and treatment centres in the country on Thursday, 10th December 2020.

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On 26th January 2021, the Federal Government announced the extension of the guidelines of phase 3 of the eased lockdown by one month following the rising cases of the coronavirus disease in the country and the expiration of phase 3 of the eased lockdown.

On 28th February 2021, the federal government confirmed that the first tranche of Covid-19 vaccines will arrive in Nigeria on Tuesday, March 2nd, 2021.

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READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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