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Tuesday, March 21, 2023

MTN Offer Brings Over 110,000 New Investors to Nigerian Stock Market

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…as telecom giant says it favours retail investors to democratise ownership

MTN Nigeria has announced the final approval of the Securities & Exchange Commission to its Offer for Sale of 575million units of ordinary shares of 2kobo each.

Reflecting the excitement of the Nigerian public to participate in the growth and success stories of the largest telecommunication service provider in the country, with over one-third market share.

With investors applying for 801.97 million units of shares, representing 139.4% oversubscription of the Offer, MTN took advantage of what finance experts call the “green shoe option”, which allows MTN to sell 15 percent more than the 575 million units Offer to the market. In all, the Securities & Exchange Commission approves that MTN Nigeria should allot 661.25 milllion units to investors who applied for the Offer.

Subscribers would expect to get the shares credited to the respective CSCS depository account on or before fortnight, in line with the provisions of the Offer for Sale prospectus.

The shares rank pari pasu with existing shares held by minority shareholders of MTN Nigeria and the new subscribers to the shares can sell the newly allotted shares on the Nigerian Exchange once credited to their respective CSCS account, if they so wish.

Interestingly, MTN favours the retail investors ensuring that their subscriptions are fully allotted, as it notes that one of its core objectives for the Offer is to democratise its prosperity with Nigerians which have been the core driver of its success over the past 22 years of operation in the country.

This stance of MTN further reinforces the incentive of one free share for every 20 units of shares purchased by retail investors, subject to a maximum of 250 shares for each retail investor. Contrarily, institutional investors, who subscribed to the Offer were allotted 72.09 percent of their applications.

The shares were offered at N169.00 per share, a significant 19.8% discount to the secondary market price of N202.50 at which it closed today, 01 February 2022. This reinforces the gains of retail investors who bought at the primary market Offer, as they may cash out through the secondary market if they so wish. However, any such investor would forfeit the free share incentive, given the requirement to hold the shares for at least 12months till 31 January 2023 before selling, as a condition to qualify for the incentive.

The MTN Offer provided a new vista for the Nigerian equity market, with the Central Securities Clearing System Plc, the depository for the capital market confirming that 114,938 new accounts were opened by the investors, who previously has no stock account but had to open one to participate in the MTN Offer. It is exciting that over 90% of the 126,720 retail participants in the Offer are first-time investors in the market, reinforcing the strong investment case of MTN Nigeria in attracting new crop of investors into Nigeria’s equity market. Notably, Nigeria’s stock market has failed to regain investor confidence after the historic sell-off of 2008 and 2009, when the market lost 45.8% and 33.8% respectively, as both retail and institutional investors continue to count losses.

More importantly, the use of the PrimaryOffer, the digital subscription portal powered by the Nigerian Exchange and CSCS also supported the participation of youths in the Offer, with MTN reporting that 76% of the successful applications which came through the digital platform are women and 85% of them are under 40 years, a major shift from hitherto demographics of investors, where only a third of investors in the stock market are under the age of 40 years.

With the success of the Offer, MTN Group, the South-African parent of MTN Nigeria has successfully reduced its shareholding in the Nigerian operation from 78.83% to 75.58%, even as the company’s CEO recently hinted that there would be two more rounds of Public Offer that would give more opportunity to Nigerians and the global investor community to own a slice of the company and reduce the concentrated ownership of MTN Nigeria to about 65%.

Some analysts believe that MTN Group is dedicated to the sell down of its ownership in the Nigerian subsidiary as a strategy to consolidate sentiment towards it being perceived as a public interest entity, which may be important as a shield against fiscal and related issues, such as recent penalty crisis and tax investigations it had surmounted in the past few years.

The CEO of MTN Group, Ralph Mupita noted; “We are pleased that this Offer has given so many Nigerians the opportunity to become owners of MTN Nigeria. With over 6.6million Nigerians directly or indirectly becoming shareholders in MTN Nigeria, the objective of broadening the shareholder base, and creating shared value has been achieved.”

Karl Toriola, the CEO of MTN Nigeria echoed his boss’ position, noting; “It has been inspiring to see so many Nigerians, many of whom are young, acquire shares for the first time, and use a digital platform to do so. This is the beginning of a journey to broaden our shareholding and there will be more opportunities to participate.”

MTN recently announced its audited 2021 financial statement, reporting an impressive 23.3% growth in service revenue to N1.7trillion or USD3.98 billion, despite losing 8million or 10.5% of its mobile subscribers in the year, due to restriction on new SIM sales and activation, as the country seeks to mitigate the use of unregistered telephone lines and those yet to be linked to the National identity management database, as a part of its measures to tame security challenges.

MTN grew profit before tax to N298.7 billion or USD720million, translating to 45.5% year-on-year growth and an expanded margin of 18.1%, even as it noted impacts of naira devaluation on its FCY-denominated cost as well as impulse of COVID-19 related expenses on operating cost.

Given the strong earnings growth, the company has declared  39.5% growth in dividend to shareholders, announcing it would pay a final dividend of N8.57 per share to gross up its total dividend for the year to N13.12 or 7.8% dividend yield based on the Offer price of N169.00.

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