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NEM Insurance shocks shareholders by announcing N1 billion Private Placement at N2.5 per share

NEM Insurance Plc obtained approval from its shareholders to raise N2.64 billion in a Private Placement.

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NEM Director at a recent AGM. Source: NEM

Last week, NEM Insurance Plc obtained approval from its shareholders to raise N2.64 billion in a Private Placement. This will see the company issue about 1,056,000,000 ordinary shares of 50 kobo each, at N2.50. The company did not state who will be buying the shares, neither did it state what it wants to use the money for.

The AGM was held at the Premier Hotel in Ibadan on the 20th of June, 2018. As at the time of publishing this article, details of the AGM were yet to be published on the website of the Nigerian Stock Exchange (NSE). NEM Insurance Plc currently has about 5.2b shares outstanding; thus, by our estimates, an additional 1.056 billion units on sale will dilute existing shareholders by about 14.2%.

To ensure that the private placement complies with the memorandum and articles of association of the company, the shareholders waived their pre-emptive rights under Article 43 of the company’s Articles. This has wide implications, as it means that shareholders who may have wanted to participate in the private placement will not be able to do so, as they have waived their rights.

NEM majority shareholders

According to the 2017 annual report of the company, shareholders with 5% and above of the company’s issued and fully paid shares as at 31st December, 2017 were as follows:
JEIDOC LIMITED owns about 368,445,497 units at 6.98%, while BUKSON INVESTMENT LIMITED owns about 337,054,367 or 6.38%. CAPITAL EXPRESS ASSURANCE LIMITED owns about 383,492,958 shares or 7.26%.

Chief Ede Dafinone represents Jeidoc Limited on the board of the company, while Mrs. Joy Teluwo represents Bukson Investment Limited. Mrs. Yinka Aletor represents Capital Express Assurance Company Limited.

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Controversial Move

The decision to embark on a private placement came as a surprise to Nairametrics, considering that the company’s balance sheet looked relatively robust and did not appear to be in immediate need of fresh funds. In the company’s most recent result for the period ended March 31, 2018, it had a balance sheet size of about N19.5 billion, out of which N10.5 billion is in net equity. Included in its net equity is about N4.2 billion in retained earnings.

NEM also has a relatively low share premium with a percentage of the Issued share capital of just about 9%. This often indicates that the company has not raised capital significantly higher than its par value, or has not raised at all. In fact, NEM last raised capital in 2010, when its issued share capital increased from about 4,976,922,766 to 5,280,502,913.

What is even more controversial is the fact that the company is offering the shares at N2.5, a whopping 50 kobo discount to the N3 share price that the stock is currently trading at. This has surprised some of the shareholders of the company who do not understand why the company will be seeking to sell its shares at a discount to its market value. NEM also just recently paid dividends of about N520 million, more reason why a capital raise via a private placement is rather surprising.

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Suspicion of Foul Play

Some analysts thus suggest that the private placement may be tantamount to foul play and may not be in the general interest of the company. Typically, companies in need of cash defer to a rights issue to raise capital from its shareholders, and if it is a sizeable offer, they also include a public offer.

Most investors believe that a public company raising capital via private placement is indicative of distress within the company, or pressure to pay debt from bondholders. NEM does not have any of these issues, which is more reason why this private placement is surprising.

An investigation from Nairametrics also indicates that most shareholders did not receive notices of an AGM, as required by law. In fact, on inquiry, shareholders who own about 3% of the equity of the company claimed that they did not receive notices. NEM did issue a press release on the website of the Nigerian Stock Exchange stating the date and venue of the AGM. However, details of the AGM were only published on its website on the 14th of June, 2018.

Nigerian Company and Allied Matters Act, however, does not list the NSE as an official destination for notices. According to section 222 of the ACT under AGM “In addition to the notice required to be given to those entitled to receive it in accordance with the provisions of  this Act, every public company shall, at least 21 days before any general meeting, advertise a notice of such meeting in at least two daily newspapers.”  Initial report suggests that NEM may have published the AGM notices in some daily newspapers, but not the popular ones. Nevertheless, section 220 does specify that notices must be sent to shareholders via mail.

Possible reason

Word on the street suggests that the reason for the private placement may not be unconnected with a scramble to increase shareholdings in the company by a section of its majority shareholders. A few years ago, the directors of the company were surprised to find out that a new bloc of independent shareholders had secured interest in the company that cumulatively amounted to over 10% of the company. This shocked the directors of the company and has given them major concern about a possible takeover bid for the company from the inside.

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Impact on share price

The latest development is likely to significantly affect the shareholdings of NEM Insurance Plc in the near term. The company’s share price has risen from N2.6 to over N3 this June alone, suggesting that a scramble is already on for the shares of this company. A scramble such as this may lead to a spike in share price in the short-term.

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What next?

Information reaching Nairametrics indicate that a petition may be sent to the Securities and Exchange Commission (SEC) on this matter by some shareholders of the company. We also won’t be surprised to see a possible litigation on this development.

About 44,700 shareholders own over 70% of the shares of this company. Also, shareholders who own over 5% of the equity of NEM, own just slightly over 20% of the company. Analysts suggest that the number of shareholders affected by the decision for a private placement may make SEC move swiftly to resolve any issues that may emanate from this development.

Retail Investors have often frowned at the lack of transparency from quoted companies, particularly insurance companies in the country. Lack of investor education and participation is also partly to blame for the inability of most investors to seek their rights as shareholders of companies.

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Business News

Lagos state moves against fake news and inciting messages merchants

The government has warned fake news and inciting message merchants to stop their evil enterprise or face legal consequences.

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The Lagos State Government has warned against fake news and inciting messages as they react to videos in social media and online space, creating tension and encouraging ethnic conflicts.

This was contained in a statement that was issued by the Lagos State Commissioner for Information and Strategy, Gbenga Omotosho, on Saturday, October 24, 2020.

In the statement, Governor Babajide Sanwo-Olu urged Lagosians to disregard the videos, which are the tools of anarchists, whose plan is to create hatred and divisiveness for which Lagos is not known for.

The statement partly reads, ‘’Inciting videos of this nature are not what our land needs now, following the loss of lives and destruction that fake news, misinformation and unfounded rumours have triggered in our dear state in the last couple of days.

‘’The government appeals to Lagosians to disregard the calls of ethnic and religious jingoists as well as agents of destruction who are on a mission to destroy our state by pitching us against one another for yet to be ascertained reasons. This is a very critical moment for us as a people. It is, therefore important that we stand together and remain circumspect because the brewery of falsehood is unrelenting in its mission.’

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The commissioner said Lagos State is the melting point of various cultures, tribes and religions across Nigeria and noted we have co-existed harmoniously for ages and will continue to live together peacefully.

He pointed out that the sad incident of the past few days affected everyone who lives, trades or works in Lagos, regardless of their tribe, culture, race and religion. He said this is a time for us to empathize with one another and not listen to purveyors of evil messages, especially on social media.

Omotosho said the government will continue to protect lives and property and warned fake news and inciting message merchants to stop their evil enterprise or face the legal consequences of their destructive actions.

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Appointments

TCN MD, Sule Abdulaziz appointed Chairman of West Africa Power Pool

The acting Managing Director of TCN, Sule Abdulaziz, has been appointed the new Chairman of WAPP.

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TCN MD Abdulaziz, four other directors receive appointment letters

The acting Managing Director of Transmission Company of Nigeria (TCN), Sule Abdulaziz, has been appointed the new Chairman of the Executive Board of West African Power Pool (WAPP). Abdulaziz was nominated by the former Managing Director of Power Holding Company of Nigeria (PHCN), Joe Makoju, who is an honorary member of WAPP.

READ: NNPC signs gas development and commercialization deal with SEEPCO

This disclosure was made by TCN’s General Manager, Public Affairs, Mrs Ndidi Mbah, through a public statement in Abuja on Thursday, October 22, 2020.

In her statement, Mbah revealed that the West African Power Pool was created by Decision A/DEC.5/12/99 of the 22nd Summit of the ECOWAS Authority of Heads of State and Government, and adopted during the 29th Summit of the ECOWAS Authority of Heads of State and Government held in Niamey, Niger.

READ: Indian firm, Ramco signs partnership deal with Nigerian airline

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The appointment was made during the 46th meeting of the WAPP Executive Board which was chaired by the Secretary-General of ECOWAS, Ki Sengui, and held through video conference on October 21.

The statement from Mba partly reads, “While making the nomination, Makoju noted that Abdulaziz is an expert in engineering with vast experience in the electricity sector and therefore will perform creditably as the new WAPP Executive Board Chairman.

READ: Continental Reinsurance Plc acquires 100% ownership of its Botswana subsidiary

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“His proposal was endorsed by MDs and Director Generals and other members of the board,” she said.

According to the statement, Abdulaziz in his acceptance speech thanked the board members and the honourary members for his nomination as the Chairman of the board and assured them of his total commitment to the overall objective of the regional electricity body.

READ: A bitter family feud has continued to hamper this company’s growth

He also expressed the need to move the pool to the next level of operational efficiency and solicited the support of member utilities, especially members of the executive board in this regard.

Explore Data on the Nairametrics Research Website 

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He urged members to ensure prompt payment of their contributions to the pool and also continue to collaborate actively with the secretariat to ensure effective and efficient coordination and implementation of all WAPP programmes.

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ENDSARS

President Buhari to address Nigerians on Lekki toll plaza shootings after investigation 

Minister of Sports says President Buhari will address Nigerians on the Lekki Toll Plaza shootings at the completion of investigations.

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President Buhari to address Nigerians on Lekki toll plaza shootings after investigation , Youth Investment Fund:  Ministry of Finance and CBN to launch provision of funds- Minister

President Buhari will address Nigerians on the Lekki toll Plaza shootings, as he awaits the outcome of the investigations into the shootings of unarmed #EndSARS protesters by soldiers.  

This disclosure was made by Mr. Sunday Dare, the Minister of Youth and Sports Development, during an interview with Arise TV on the unrest and uncertainties gripping Nigeria following the protests over police brutality. 

READ: #EndSARS: United Nations condemns the use of excessive force by Nigerian Armed Forces

The Minister emphasized that the President during the National Security Meeting yesterday has ordered an investigation into the Lekki Toll Plaza shooting, and thereafter he would speak on the incident. 

READ: #EndSARS Protests: Osinbajo commiserates with victims of Lekki shootings

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What they are saying 

When asked by Charles Aniagolu of Arise TV why the President hasn’t made an official statement on the unfortunate event at the Toll Plaza, Mr. Dare explained in his response that President Buhari hasn’t made a statement on the tragedy because he wants to have all the facts, which will absolutely be made public.  

READ: Buhari presented with gold bars mined in Zamfara as Nigerian prepares to launch PAGMI scheme.

“It is important to get all the facts right before we go forward. In this case, it’s going to be difficult to hide these facts because we live in a multimedia world and we have pieces of evidence and corroboration and I think it is important to get the facts right.

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READ: #EndSARS: Feminist Coalition raise Cryptos worth $126,000

“I think that’s the part the President has towed and I am sure that when the facts are made available, this President – because he has integrity – will level with the Nigerian people about what happened on Tuesday in Lekki.” 

Mr. Sunday Dare said the present administration’s commitment to protecting the rights of all citizens is unshaken. He reiterated that in line with this core mandate, a presidential pronouncement was made by the Presidency to permanently dissolve the notorious SARS group. 

Explore Data on the Nairametrics Research Website 

He disclosed that the level of responsiveness and concrete steps that the President has taken to stem down civil unrest in the country is commendable, as the #5 of 5 demands are fully accepted by the President. 

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