There is a cloud of uncertainties gathering around MTN Nigeria’s planned initial public offering, IPO.
Despite promises that it would take place this August, many insider details point to the fact that the general public might be in for a shocker as regards the share sale.
Last week, there were unofficial reports that the company has finalised its plans to begin the IPO by next month should it get the go-ahead of the Securities and Exchange Commission, SEC. However, insider contacts claimed that the opposite could be the reality.
Sources claimed that MTN has not yet to fill required papers and filings for a typical IPO where a company sells majority or a required minimum stake of its shares to the general public. This gets the question if MTN is really ready for an IPO in August (next month), given its glaring unpreparedness.
People who are familiar with the matter are already claiming that MTN might be planning to do the opposite. Some are already suggesting that MTN might be looking at carrying out a private sale or private placement which might be executed through an accelerated ‘bookbuild’.
Let us break it down. A private placement according to Investopedia is: “A capital raising event that involves the sale of securities to a relatively small number of select investors. Investors involved in private placements can include large banks, mutual funds, insurance companies and pension funds. A private placement is different from a public issue in which securities are made available for sale on the open market to any type of investor.”
While an accelerated bookbuild is: “Is a form of offering in the equity capital markets. It involves offering shares in a short time period, with little to no marketing. The bookbuild of the offering is done very quickly in one or two days. Underwriters may sometimes guarantee a minimum price and sale proceeds to the firm.
While the latter is a more aggressive way of selling a company’s shares to select members of the public, insider sources are claiming that MTN Nigeria might be looking at the former as a better option instead of a full-blown IPO that would give every ‘Tom, Dick and Harry’ access to its shares.
However, should the company plan to do any of the above, it would find it difficult to go ahead for many reasons. Despite the fact that MTN has a huge debt pile, elite local investors who are waiting on the line to cash out the preference shares they bought more than 11 years ago, it would like to do anything possible to meet its obligations, there are rules and guidelines as well as regulatory bottlenecks that would hack it down on the way.
First is that MTN’s hullabaloo of an IPO was a forced one and not willful. It would be recalled that MTN agreed to list minority part of its shares on the Nigerian Stock Exchange as part of the negotiations with the Nigerian Communications Commission, NCC, to reduce its record fine to N330 billion from the humongous $5.2 billion recommended by the NCC. Should it suggest a private placement or bookbuild, there might be a regulatory guillotine falling on its neck and its fine negotiation might hit the rocks with the regulator for breach of the agreement.
An analyst in the equities market said MTN has also shown various degrees of its unseriousness towards the listing as it keeps shifting the dates and could announce another postponement anytime which was a symptom that the IPO was not in its plans. He, however, said the IPO might be its last resort as the company plans to raise money to reduce its debt burden.
However, there are signs that IPO could grudgingly pull through because MTN successfully listed on the Ghana Stock Exchange, GSE raising close to $750 million from public investors.
MTN is Nigeria’s largest mobile carrier with about 50 million subscribers bust recently under pressure after its South African owners declared their first full year loss after its Nigerian fine was weighted on its balance sheets. MTN has only paid about 50% of the fine and will have to defray the remaining over the next few years.