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Tuesday, March 21, 2023

Ellah Lakes Undertakes to Sell Down 25% of Shares, But Where’s the Value?

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Following discussions with the Nigerian Stock Exchange (NSE), on the lack of liquidity in the shares of Ellah Lakes Plc, due to the Company’s free float of 14.55 percent, three major shareholders of Ellah Lakes have each undertaken to sell down 25 percent of their shares held in Ellah Lakes towards the resolution of the Company’s free float deficiency, on or before the 15th of March 2021.

The NSE’s regulations require that all companies listed on the exchange’s main board must have a minimum of 20 percent of their shares held by members of the public or a free float value of Twenty Billion Naira.

Following the completion of the acquisition of Telluria in 2019, a majority of the shares of Ellah Lakes Plc were consolidated, and the free float was reduced to 13 percent (below the regulatory threshold of 20%).

“In a bid to rectify this situation, CBO Capital Partners, Blackman & Co, and Osaro Oyegun have given an undertaking with the intent of bringing the Company into compliance with the 20 percent free float requirements of the Nigerian Stock Exchange (NSE).

Chuka Mordi, the CEO of Ellah Lakes Plc said: “We fully appreciate why we need to have more shares in the hands of the public, which is why we are listed on the Nigerian Stock Exchange. We are working towards compliance, and we fully expect that we can achieve this by the deadline of 15 March 2021, as to galvanise, and encourage liquidity in the shares of Ellah Lakes Plc.”

However, the question we at MoneyCentral would have for Mr Mordi is where’s the value?

Ellah Lakes 9 months consolidated results for the period ending April 2020, shows that the firm which could be defined as a zombie company, made zero revenues even as expenses surged.

At MoneyCentral, we define zombie companies as corporations whose cash flow is not sufficient to even cover their interest on loans, let alone other expenses.

The agricultural services firm had loans outstanding of N596 million for the period.

Ellah Lakes recorded zero revenues for the 9 months’ period, while administrative expenses came in at N12.23 million and personnel expenses N91.75 million.

This led to an operating loss of N100.5 million at the firm.

Ellah Lakes had payables of N331 million outstanding as at the 9 months’ period, including salary payable of N112 million and other liabilities of N196.2 million, despite reporting zero revenues.

Related party transactions include N305 million liable to CBO Capital Partners Limited.

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