What you should know before buying MTN shares

MTN

Today, MTN Nigeria, the country’s largest mobile carrier will be listing its shares on the Nigerian Stock Exchange, NSE. After more three years of planning and postponement, the company will be finally available to the investing public.

Yesterday (Wednesday), MTN confirmed that it has received the go-ahead of the Nigerian Stock Exchange, NSE, to list its shares on the bourse.

Lagos-based MTN Nigeria has been providing financial regulators and the exchange its official filing to list on the exchange through an introduction.

The company has set its introduction price for N90 per share.

The frenzy generated by the listing today has been enormous from various quarters of the investing public. While some analysts and retail investors see the introduction price as overpriced, others see it as a good price given MTN’s record of revenue and profit performance.

For the full year period of  2018, MTN Nigeria said grew its revenue by 23% for the full year 2018. The group said in its latest disclosure that it delivered a 10,7% increase in constant currency terms. This was led by the growth of 17,2% by MTN Nigeria.

In the first quarter of 2019, the company said MTN Nigeria service revenue rose by 13.4% with an EBITDA (earnings before interest, tax, depreciation and amortization) rising to 53,3% compared to 44,2% in the previous year.

With a very enthusiastic trading activity expected today, some analyst cautions many would be investors to tread carefully, understand what they are buying and also consult their investment advisors.

According to an insider source, there is an indication that many investors might be able to buy the shares quickly as they expect because of a private placement that was done to high-valued and institutional investors before the listing “The private placement was sold at $18 per share (N6,000 per share) and minimum was 1 million unit.” PageOne cannot independently confirm the report.

The publisher of a business and financial news website who craved anonymity said:

“I always tell people to be careful and mostly stay away from IPOs or shares introductions. Because most IPOs are subjective in terms of valuation of the company and pricing of shares.”

“The owners of the company usually get an investment bank to do the filings, they pay them and they also pay them a commission on all the shares that will be sold. Existing owners/shareholders dictate the tune.”

“What often happens is that existing shareholders use IPOs/introduction to take out money for themselves. So you find out that after an IPO/introduction, share prices often fall before it finally finds its feet, many stocks don’t recover quickly and they might take years to rise. Although the case of MTN might be different”

“Because the market will price the stock properly as a result much information the company will be providing E.g Quarterly reports, acquisitions, mergers, loan impairment, debt/leverage levels, market share, revenue, etc. In the case of MTN, because it is an indirect listing, the price will appreciate quickly due to huge demands. Giving a false idea that the company is more valuable to buy.”

“Once major shareholders start selling, the stock will correct itself and might crash lower than its introduction price and those who bought would have to wait longer than they expected for the share price to appreciate.”

Today’s listing will make MTN, Nigeria’s largest mobile carrier, the second largest traded company by market capitalization of about N1.8 trillion. In its last analysts call, MTN said its subscriber base is now 60 million. The company leads Globacom and Bharti Airtel’s Airtel Nigeria in Africa’s largest mobile market.