MTN Nigeria Communications Plc suffered its first share price depreciation at the weekend, ending a six-day consecutive price rally since the listing of the largest telco on the Nigerian Stock Exchange (NSE).
MTN Nigeria had on May 16, 2019 listed its entire issued share capital on the NSE by way of introduction. MTN Nigeria listed 20.35 billion ordinary shares at N90 per share to emerge the second most capitalised company at the Nigerian stock market. The listing was greeted with spontaneous rally, with the telco rising by the market’s 10 per cent maximum daily allowable price change for five of its six positive trading sessions.
After six consecutive trading sessions that saw the telco rallying N1.20 trillion in capital gains, MTN Nigeria at the weekend recorded its first price loss, dropping by N9 from its high of N149 to close weekend at N140 per share. MTN Nigeria’s market value dropped from its opening value of N3.03 trillion, its highest, to close weekend at N2.849 trillion, representing a loss of 6.04 per cent or N183 billion. MTN Nigeria had entered the stock market with entry listing value of N1.83 trillion.
The price decline came on the heels of increased supply of MTN Nigeria’s shares as more and more minority retail shareholders and bargain-hunters acquired shares from pre-listing shareholders of the telco. MTN Nigeria was the most active stock at the Exchange last week and it accounted for about one-fifth of total turnover at the equities market. It traded 290.1 million shares within the five-day trading week.
Market analysts said they expected a more efficient pricing equilibrium for the telco in the weeks ahead citing the steep decline in volume of bids and open market orders and increasing negotiating power on the buyers’ side. MTN Nigeria had rode on the crest of open market orders for five days, with most investors willing to buy with as much as the highest price. As such, the divesting investors automatically set their price at the top-end of the price limit.
Many analysts believe MTN Nigeria might take advantage of its bullish start to launch an initial public offering (IPO), a campaign that will widen the shareholders’ base of the telco.
Astonished by the daily jump in share price and the inability to get the shares of the company, many Nigerians had expressed concerns on the propriety and fairness of the telco’s pricing trend. The NSE subsequently allayed fears over the pricing trend, explaining the technicalities of price discovery under a listing by introduction as against a post-IPO listing, which most minority retail investors are familiar with.
On the initial paucity of shares, the NSE explained that the seeming scarcity of the telco’s shares was due to the peculiarity of a listing by introduction, insisting that MTN Nigeria met all listing requirements, including minimum free float for its listing on the premium board.
According to the Exchange, where a company lists following an IPO, shares are expected to be available for trading on the day of listing. However, in a listing by introduction, no shares have been offered for subscription by the company prior