• Insist culprits are traceable, currently sit on board of listed firms
As rising inflation, hardship, foreign exchange losses and other macroeconomic challenges take a toll on investment in the capital market, retail investors have renewed calls for the regulator to intervene and recover over N700 billion investors’ funds trapped in private placement since after the 2008-2009 global financial crisis.
This comes as retail investors grapple with perennial issues stifling investment and impacting negatively on returns and dividends in Nigeria.
According to them, regulatory intervention would compel companies involved to either return the capital to the owners or list their shares in the secondary market of the exchange to generate returns for investors, boost confidence and deepen the market.
Moreover, they claimed that it will help to cushion the effect of hardship most of the investors are experiencing currently due to the impact of the nation’s macroeconomic woes, especially the FX crisis and rising inflation on quoted companies.
Indeed, it has been about 17 years now that investors pooled together N700 billion in a well-advertised private placement of some companies in the capital market but till date, both the capital and interest earnings remain uncertain.
During that period of boom, precisely in 2007, many companies flooded the capital market. However, a good number of them have changed their franchise and registration to avoid any trace of location.
For emphasis, private placement is a special kind of offer whereby the securities of a company are sold to specific buyer(s). The company involved here could be private or public while the security may be debt or equity. The proceeds are mainly used for targeted developmental projects by the company.
The investors argued that the directors of some of those companies are sitting on the board of many listed firms, an indication that many of these firms were successful in their bid.
They noted that because existing laws do not permit the Securities and Exchange Commission (SEC) to regulate private companies’ placement, a large portion of the fund was diverted into other investments outside the objectives declared in the prospectus.
They urged the SEC to review the private placement laws and include, as part of the prospectus, a deadline for listing to protect the interest of Nigerian investors as the process, which most of the companies coming for the offering follow, does not show any sense of credibility or transparency in terms of the agreement.
National Coordinator of Progressive Shareholders Association, Boniface Okezie, said some of these firms, although not registered, received regulatory approval with an agreement that these shares would be listed to generate returns but subsequently reneged on the promise.
He wondered why some of the companies are quoted in other securities exchanges but not listed on the Nigerian Stock Exchange.
Okezie pointed out that what the SEC failed to do during the period was to put up advertisements in various media to warn and educate investors on the dangers of investing in unregistered companies as being done by the present leadership of the SEC concerning the cryptocurrency investment.
“Instead of looking for unclaimed dividends, the SEC should help go after those companies. Billions of naira can be recovered and the government will also make money since the government is desperately looking for money at this time.
“It’s just that everybody wants to play safe. If those companies were making progress, somebody would have claimed credit but now we invested and it turned sour, and nobody has claimed responsibility.
“When the public were buying those stocks from these fraudulent companies, the regulators at that time did not put out publications to warn members of the public not to have anything to do with those companies as the present SEC leadership is doing with cryptocurrency,” he stated.
Member, Exceptional Shareholders Association, Olugbosun Ariyo said the N 700 billion investors’ fund trapped in a private placement scam is a pressing concern that undermines the SEC’s credibility and investor confidence in Nigeria’s capital market.
He urged the SEC to reconsider its stance on private placements and establish guidelines to ensure transparency and accountability.
In addition, he suggested that the regulator should collaborate with agencies like the EFCC to trace and recover the funds.
He affirmed that the issue of the private placement is not within the purview of the SEC’s regulation, but stressed the need to address the issue to strengthen investors’ protection and market integrity.
“Investors should be enlightened on the risks associated with private placements and the importance of thorough research before investing. There is also a need to increase oversight and monitoring of private placements to prevent future scams,” he stated.
Checks showed that since after the 2007-2008 global financial crisis, Nigerian investors are still battling with perennial issues that have stifled their investment and exposed them to vagaries of uncertainty.
Aside from the N700 billion trapped in private placement scams during the era of the stock market boom, these retail investors were faced with the issue of the sale of the three nationalised banks. Also, the case involving 300 investors of Partnership Investment Plc whose stocks totaling N4.8 billion are involved in a ‘shady’ deal.
Currently, in addition to the general impact of the nation’s macroeconomic challenges on the citizens, retail investors are counting their losses as the profitability of companies they staked their funds, especially companies under the FMCG are affected by prevailing FX scarcity, inflationary pressures, insecurity among others which has continued to erode their dividend payout with no hope of recovery in sight.
Most of the companies in the sector have recorded over 25 per cent Year to Date losses as demand for their products plummeted.(Guardian)
