Will the MTN Nigeria IPO be for only a few investors?

The long-awaited listing of MTN Nigeria on the Nigerian Stock Exchange (NSE) is almost here. Yesterday, it was reported that MTN’s bid to list on the NSE has been approved by the Securities and Exchange Commission (SEC) and the company would be listed on the Nigerian bourse in August. This comes about two years after the Nigerian Communications Commission requested that the company must agree to list its shares on the NSE before its fine would be reduced significantly.

This news on the IPO has been debunked by Daily Trust news platform which reported today that a management source of the Security and Exchange Commission (SEC) confirmed that  MTN Nigeria has not filled the necessary papers for the long-awaited Initial public offering (IPO). Although MTN Group’s President/CEO, Rob Shuter, in April already confirmed to Bloomberg that the IPO will happen before the end of the year.  

According to MTN, it will be listing 30 percent ordinary shares to the investing public which is estimated to worth about N3.9trn ($10.88 billion). However, there are concerns that the shares might not be sold to the public as stated in the media. Some Nigerians fear that these shares might even be bought by investment companies who will then sell it to the investors with lots of money as opposed to selling it to the general public. But, it is worthy to note that the 30 percent that is being listed by MTN is more than the 20 percent free float required by the NSE from any company. The Nation revealed that the 20 percent free float rule by the NSE is aimed at preventing “undue concentration of securities in the hands of the core investors and related interests”.  If this rule is taken into consideration, it would mean that apart from availing the investing public the opportunity to take advantage of IPOs as means of wealth creation, it will also hinder the possibility of stock prices’ manipulation which can occur when securities are concentrated in the hands of a few investors.

According to a Pre- IPO presentation, MTN would split one share into 50 units in order to list 20 billion shares. With this, the company will be able to set the IPO price through book building.

The revenue gotten from this IPO will be used by MTN to pay up its debt, redeem preference shares issued to existing investors who bought the shares 11-years ago. It will also help in reducing the company’s exposure to the dollar. This listing will also be MTN’s major listing in West Africa after successfully listing in Ghana in May. It also plans to list in Ivory Coast.

MTN has appointed Nigerian investment firm Chapel Hill Denham as lead issuing house for the IPO, while South Africa’s Rand Merchant Bank, Renaissance Capital, and Vetiva Capital were picked as joint issuers. These Banks and brokers will work with global co-ordinators Citigroup Inc. and Standard Bank Group Ltd.