Three Nigerian companies have gotten shareholders’ approval to raise about N58.6 billion this year from rights issues. The companies include Wema Bank Plc, N40 billion; Abbey Mortgage Bank Plc, N15 billion; and Neimeth International Pharmaceuticals Plc, N3.6 billion.
Though most Nigerian corporates have abandoned public offer of their shares in the capital market, which is the traditional medium to long term funding option for such institutions, to corporate bonds and commercial papers due to inflationary pressure and other economic woes, few ones are still taking of renewed investors’ confidence to raise fresh funds to meet operational and investment needs.
According to market watchers, floating rights issues is a big challenge at this time of instability and high dollar surge as most core investors give dollar-denominated loans to these companies.
It is believed that rights issues happening at a time when the nation’s economic situation is not favourable to many local investors will surely affect the ownership structure of most companies after the completion of the whole exercise in favour of the core investors or some moneybags to the detriment of Nigeria investors.
By failing to take up their rights issue, the shareholders will lose the opportunity to increase their stake in these firms.
Below is a compilation of the planned right issue as announced by these companies. The information was sourced from news reports, press releases amongst other reliable sources.
Wema Bank – N40 billion rights issue
Wema Bank Plc has concluded arrangements to commence its N40 billion rights issue to the existing shareholders of the bank in August.
Wema Bank got shareholders’ nod at an Extraordinary General Meeting (EGM) to raise capital of up to N40 billion by way of a rights issue to the existing shareholders of the bank by issuing two new shares for every three shares held in the reconstructed capital of the bank.
- The Chief Finance Officer of the bank, Mr. Tunde Mabawonku who made the disclosure at an interactive session attended by Nairametrics said the potential plan was to start engagement in June and open the process formally in August.
- Mabawonku noted that the bank will utilise the raised capital to drive growth phase for the bank and accelerate improvements in the share price, deepen value creation, increase credit creation, increase digital play with technology acquisition and increase geographic expansion.
- In addition to the raise of additional capital, the Directors were also authorised to undertake the Rights Issue on dates and terms determined by the directors themselves.
- At the EGM, shareholders waived their pre-emptive rights to any unsubscribed shares offered pursuant to the Rights Issue in the event of an under-subscription and thereby authorised the directors to offer/issue such unsubscribed shares at a price not less than that specified in the Rights Issue Circular, in such manner as they think most beneficial to the bank.
Abbey Mortgage Bank Plc – N15 billion capital raise
Shareholders of Abbey Mortgage Bank Plc have approved the company’s board of directors ‘quest to raise additional capital up to N15 billion for business expansion.
The shareholders at the company’s 30th Annual General Meeting held in Lagos authorised the directors to raise the additional capital locally or internationally whether through Right Issue, Public Offer, Private Placement, Special Placing in such numbers as shall be determined by the directors.
- Addressing shareholders at the AGM, the Chairman of the company, Mazi Emmanuel Kanu said the management of Abbey with the support of the board mase some strategic decisions towards addressing legacy delinquent assets.
- “I am extremely proud of the progress we made in the last twelve months and the outcome that continues to validate our strategic direction.
- We ramped up recovery efforts which led to a net write back off N180 million against a net credit loss of N3.8 billion in 2020.
- At the fore of our midterm objective is a conversation to a regional bank and we will begin that process in the coming months. In addition, we will consolidate the ongoing digital transformation of the bank, with a full deployment of our corporate and mobile banking application, while we continue to develop products that allow for retail acquisition and retention, as well as increased wholesale segment transactional capabilities”.
Neimeth International Pharmaceuticals Plc – N3.67 billion right issue
Neimeth International Pharmaceuticals Plc has concluded arrangements to commence its N3.67 billion right issue to the existing shareholders of the company in August.
The pharmaceutical company held a Completion Board Meeting to float a Rights Issue of N3.67 billion through the Nigerian capital market.
- The Rights Issue which will commence on August 3, 2022, will be used to raise the sum of N3,679,618,625 at the cost of N1.55k per 50 Kobo share.
- The shareholders of the company had in March 2022 at the 63rd Annual General Meeting (AGM) approved the creation of 2,373,947,500 additional Ordinary Shares which will be allotted at the rate of five new shares for every four shares currently held in the company.
- “Neimeth has taken an upward turn since 2018 when it returned to profitability after nearly a decade of predominantly losses. From a loss of N404.9 million in 2017 the Company made a profit of N166.4 million in 2018, N304.4 million in 2019, and N297.3 million in 2020 at the upsurge of COVID pandemic and N365.2 million in 2021,” he said.
- Following the growth trajectory, the share price of Neimeth increased 343% from 40 kobo as of September 30, 2019, to N1.77 as of March 14, 2022.
- Between 2012 and 2021 the Earnings Per Share of Neimeth grew 280% from negative 5kobo to 14 kobo per share.
- The right issue could also be a reason for the rise in share price.
The strategy is they already have core investors wiling to pump funds into the process even when majority of shareholders are not interested
The non-interest of shareholders in public offering stems from the 2008 meltdown and lacklustre response of the regulators even till date. How can 5 people in NGX allocate N754million to themselves? Is was bound to bring negative sentiments to the market