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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.



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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Tech News

MTN, Vodacom launched 5G in sub-Saharan Africa in 2020 – GSMA Report

Vodacom and MTN launched their first major 5G networks in Sub-Saharan Africa in 2020, according to the GSMA 2020 report.



The Global System for Mobile Communications (GSMA) 2020 report revealed that Vodacom and MTN launched their first major 5G networks in Sub-Saharan Africa in 2020.

The telecoms operators offered 5G mobile and fixed wireless access (FWA) services in several locations across South Africa – this appears to be a welcome development, as the South African government had already assigned temporary spectrum in the 3.5 GHz range in the wake of the Covid-19 pandemic.

Obviously, the proximate opportunity to be harnessed for the 5G in South Africa is to use FWA to bridge the gap in fixed broadband connectivity for homes and businesses.

According to the report, there has been 5G trial runs in almost all the countries in Sub-Saharan Africa, including Gabon, Kenya, Nigeria and Uganda but the possibility of mass deployment of the 5G network is still not guaranteed, as there are significant levels of unused 4G capacity. Also, the 4G adoption rate is still relatively low, creating opportunities for the operators to increase their stakes in 4G.

As a boost to mop up the unused 4G capacity, the partnership between Safaricom and Google to finance the acquisition of 4G smartphones, provides the desired momentum as low-income consumers pay for 4G devices in convenient and flexible daily installments.

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According to the report, it is expected that over the next five years, the number of smartphone connections in Sub-Saharan Africa will almost double to reach 678 million by the end of 2025 — an adoption rate of 65%.

What you should know

  • It is expected that by 2025, there will be a little below 30 million mobile 5G connections in Sub-Saharan Africa, equivalent to almost 3% of total mobile connections.
  • The mobile market in the region will reach several important milestones over the next five years: half a billion mobile subscribers in 2021, 1 billion mobile connections in 2024, and 50% subscriber penetration by 2025.
  • The achievement of these critical milestones would be predicated on the operators’ commitment in providing reliable infrastructural networks across the region.
  • Between 2019 and 2025, the operators in the region would have expended/invested about the sum of $52billion in infrastructure rollouts.
  • The GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators with almost 400 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organizations in adjacent industry sectors.

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Financial Services

Stamp Duty on Nigerian Stock market transactions pegged at 0.08% from December 7

The NSE has given clarifications on the public notice released by the FIRS, itemizing contract notes at an ad valorem rate of 0.08%.



NSE prepares to launch West Africa’s first Exchange-traded derivatives

The Nigerian Stock Exchange has given clarifications on the public notice released by the Federal Inland Revenue Service (FIRS) in July, itemizing contract notes at an ad valorem rate of 0.08% up from 0.075%, effective 7th December 2020.

The circular released by the Nigerian Stock Exchange reads:

“In reference to the Public Notice in the Business Day Newspaper of Monday, 20 July 2020, captioned ‘Clarification of Administration of Stamp Duties in Nigeria’ issued by the Federal Inland Revenue Service (FIRS) (A copy is attached as Appendix A for ease of reference).

The Public Notice provided, amongst other things, information on dutiable instruments and the applicable flat or ad valorem rates, with Contract Notes 1 itemized at an ad valorem rate of 0.08%. As you know, this is at variance with the current rate of 0.075% administered in the Nigerian Capital Market.”

To that extent, Dealing Members of the Nigerian Stock Exchange are to note the following:

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  • Effective December 7, 2020, the Central Securities Clearing System Plc. (CSCS) will adjust its system to implement the automated deduction of the Stamp Duty rate of 0.08%.
  • Dealing Members are required to immediately engage their software vendors for the required adjustments to their technology applications, to reflect the 0.08% rate ahead of the effective date of 7 December 2020.
  • Dealing Members are required to communicate the changes above to their clients immediately, ahead of the effective date.

What you should know

Nairametrics revealed that the FIRS listed at least 50 types of transactions that are eligible for stamp duty deductions.

Some of the listed chargeable transactions include bank deposit or transfer, loan agreement, Memorandum of Understanding (MoU), sales agreement, will, tenancy/lease agreement, and all receipts.

The FIRS noted that the recently inaugurated FIRS Adhesive Stamp is not the same as the postage stamp administered by NIPOST for the purposes of delivery of items and documents.

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The Stamp Duties Act, 19391 defines Contact Notes as “the note sent by a broker or agent to his principal, or by any person who, by way of business, deals, or holds himself out as dealing, as a principal in any stock or marketable securities, advising the principal, or the vendor or purchaser, as the case may be, of the sale or purchase of any stock or marketable security, but does not include a note sent by a broker or agent to his principal where the principal is himself acting as broker or agent for a principal.”

See the circular below:

Download (PDF, 566KB)

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Covid-19: UK to approve Pfizer, BioTNech vaccine, to start immunization December 7

The UK government is set to approve the COVID-19 vaccine developed by BioNTech SE and Pfizer Inc next week.



Covid-19: AstraZeneca vaccine gets huge boost, produces immune response in elderly, Vaccine, COVID-19: Russia to roll out vaccine in September ahead of the West 

The global reception of the Covid-19 vaccine developed by Pfizer Inc in collaboration with BioNTech following the positive outcome of its phase 3 trial, seems to have intensified as it is set for approval by the UK medical regulator.

According to Reuters, a report from Financial Times on Saturday suggests that deliveries would commence within hours of the authorization with the first immunizations using the BioNTech and Pfizer vaccine possibly taking place from December 7.

The UK Prime Minister, Boris Johnson, had earlier in the day, named Nadhim Zahawi, who is the current junior business minister, as the minister responsible for the deployment of COVID-19 vaccines.

The UK government has placed an order for 40 million doses of the Pfizer and BioNTech vaccine, which has been found to be 95% effective in the final analysis of the phase 3 trials in preventing the spread of a virus that has killed over 1.4 million people across the world with its devastating impact on the global economy.

The UK government had on November 20, formally asked its medical regulator, the Medicines and Healthcare Products Regulatory Agency (MHRA), to conduct a study of the Pfizer-BioNTech COVID-19 vaccine with a view to determining its suitability, the first step in making it available outside the United State

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The government which had secured 100 million doses of the Covid-19 vaccine developed by AstraZeneca and University of Oxford had also asked the regulator on Friday to assess the vaccine for a possible rollout before Christmas.

What you should know: The US drugmaker, Pfizer Inc, on November 18, 2020, announced that a final analysis of clinical-trial data of its experimental Covid-19 vaccine, which it is developing in collaboration with BioTNech, showed it was 95% effective, thereby paving the way for the company to apply for the first U.S. regulatory authorization for a coronavirus shot.

Pfizer said they had no serious safety concerns in a trial that involves almost 44,000 participants as their vaccine protected people of all ages and ethnicities.

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