An unusually large volume of Wema Bank shares has been trading on the Nigerian Stock Exchange (NSE) in the last few days.
On the 28th of March 2019, 1,703,484,903 billion shares valued at N1,275,138,394 were traded in 74 deals.
In yesterday’s trading session, 1,456,628,534 shares valued at N1,048,737,990.24 were traded in 97 deals.
While it is yet unknown if the trades are an entry or exit by a particular investor, they represent a significant percentage of the bank’s issued share capital. Wema has a total of 38.5 billion shares in issue.
The transactions from both days thus amount to 8% of the company’s issued share capital.
Current key shareholders
Figures from the bank’s FY 2018 results show that the following shareholders held 5% or more of issued share capital:
Is insider trading involved?
Some analysts have raised a red flag, regarding the possibility of insider trading occurring.
On the 29th of March, 2019, when the first heavy trade occurred, the bank released its full-year 2018 audited results. More importantly, it paid a dividend of N0.03 per share, the first in almost a decade.
Wema bank just declared dividend payment after over a decade of not doing any kind of cash or stock dividend payment. Two trading days before the declaration, the bank traded a historically high number of shares.
— Bill Gates’ Maiguard (@knightofdelta) April 1, 2019
In a series of tweets from its Twitter handle, the bourse denied any form of wrongdoing had occurred.
The trades you referenced were carried out within the market-determined price. The units involved were less than 5% threshold and the mandate was executed under the Large Volume terms of The Exchange. We are committed to protecting investors by creating a fair and orderly market.
— The Nigerian Stock Exchange (@nsenigeria) April 1, 2019
With our surveillance platform, we are able to monitor market manipulation (including spoofing and layering), detect and deter manipulative tendencies, gather intelligence, carry out traders’ monitoring and analysis, conduct multi-asset and cross-market surveillance.
— The Nigerian Stock Exchange (@nsenigeria) April 1, 2019
Rule 15.32 of the NSE Rule Book states that brokers are supposed to notify the Exchange when trading 5% of an Issuer’s total listed securities or more.
- All Dealing Members or Authorized Clerks who wish to trade in any stock or security amounting to five-per-cent (5%) of an Issuer’s total listed securities or more shall notify The Exchange before executing such trades or within twenty-four (24) hours after such trades have been executed.
- Notification from the Dealing Member or Authorized Clerk to The Exchange shall be in form of: (1) A letter from the Dealing Member or Authorized Clerk informing The Exchange about the mandate received; and (2) A copy of the mandate which shall be in the form of a letter or email from the owner to the Dealing Member or Authorized Clerk.
- Any breach of this rule shall result in suspension of the Dealing Member for ten (10) business days and payment of a fine of One Hundred and Fifty Thousand Naira (N150,000)
The puzzle
While no form of wrongdoing may have occurred, the timing of such a huge trade is suspicious.
If the trades in question are linked to one singular entity, then a notice should have been issued following the transaction.
Wema Bank closed at N0.70 in yesterday’s trading session, down 9.09%. Year to date, the stock is up 11.1%.
Results for the 2018 financial year show that gross earnings grew from N65.2 billion in 2017 to N71.5 billion in 2018. Profit before tax rose from N3 billion in 2017 to N4.7 billion in 2018. Profit after tax increased from N2.2 billion in 2017 to N3.3 billion in 2018.
