Two companies – Afrik Pharmaceuticals Plc and African Paints Nigeria Plc – have been delisted by the Nigerian Stock Exchange (NSE) from trading on the secondary market. The delisting happened over the weekend following the approval of the National Council of the Nigerian Stock Exchange.
Details of the incidents leading to the delisting
The companies, both of which have been quoted on the NSE for the past two decades, were delisted due to their constant inability to adhere to the standards required of them prior to their quotation.
Prior to this time, the NSE tried severally to get the companies to comply with the best practices but all to no avail. Consequently, they were served the delisting notice in October 2016 and then reminded again in 2017 through public announcements made by the regulator on two national dailies. But despite the notices and reminders, the companies still failed to take the necessary actions towards regularising their listing status. Note that this despite the fact that they had the opportunity to do so.
Following these developments, the NSE still gave the companies three months of grace to take care of their compliance issues. But they never took advantage of the opportunity, and as such could not meet up with the time-frame given to them.
Justification for delisting
It is highly important for companies to comply with the post-listing requirements of the NSE, and all other regulations guiding the capital market. That is the only way to ensure that shareholders’ investments are safeguarded.
Consequently, in its determination to achieve a world-class capital market and guarantee investor confidence, the NSE has undertaken steps to penalize erring quoted companies who fail to adhere to its listing stipulations; including prompt disclosure.
Recently, the regulating agency has delisted several companies who failed to comply with its standards. Recall that in 2017, about five entities were delisted from the NSE quoted companies list, including Beco Petroleum Products Plc, Mtech Communications Plc, MTI Plc, UTC Plc, and AshakaCem Plc.
In a similar development, 7Up Nigeria Plc in January this year commenced the process of delisting from the Nigerian Stock Exchange amidst protests from its minority shareholders.
It should be noted that there are two types of delisting that can be carried out by the NSE; voluntary and compulsory delisting. Under a voluntary delisting window (which seldom happens), a quoted company can decide to delist from the Exchange due to reasons such as mergers/acquisition. On the other hand, the NSE can compulsorily delist a firm when said firm fails to meet up with post-quotation standards.
However, these companies failed to take the appropriate steps to regularize their compliance status within the three month period. In spite of this, the Exchange continued to engage these companies but they did not take the requisite steps to comply, consequent upon the foregoing, the Exchange has proceeded with the delisting of these entities from its Daily Official List.-Nigerian Stock Exchange
What happens when a company gets delisted?
Delisting is the process of removing a company from the official list of the stock exchange. In the event that a company gets delisted, the management of such a company would have to consult their stockbroker to arrange an Over the Counter (OTC) sale. If the company’s shares are listed on the NASD OTC exchange, they can be traded there.
Note that during this process, the shareholders will not be affected per se, even though they will not be able to sell off their shares or have as much transparency as they hitherto did.