Nigerian anti-graft police raids MTN Nigeria HQ over share price manipulation

The Economic and Financial Crimes Commission, EFCC, Nigeria’s anti-corruption police has reportedly raided the Lagos headquarters of MTN Nigeria.

People with the knowledge of the matter claimed that EFCC operatives stormed the mobile carrier’s headquarters carting away relevant documents to the NSE listing.

Last week, MTN Nigeria Communications Plc listed N1.8 trillion worth of its shares at N90 per share in a highly-anticipated equities market listing on the Nigerian Stock Exchange, NSE.

Within the last one week after the listing, the share price has risen by more 60% pushing the company’s market capitalization to about N3 trillion nearing the market cap of Dangote Cement Plc, the exchange’s most valuable company.

Various traders and stockbrokers alike have criticised the trading process complaining of lack of available sellers for the stock. Traders who completed few deals claimed they were mainly cross trades happening like a back room over the counter deal. People with the knowledge of the matter claimed that the sales were close to 10-15% higher than the live rates on the exchange, the more reason why all the aggregate sell prices kept pushing up the actual share price on the exchange.

However, the listing by introduction of Nigeria’s largest mobile carrier had generated heated debates, allegations of share price manipulation, confusion and anger from the stockbroking, trading and investing community.

While MTN Nigeria had denied any wrongdoing claiming that its shareholders reserve the right to sell their shares to any party on the exchange, there are complaints that the company alongside it’s existing shareholders are hording the shares to prop up the value of the shares by creating artificial scarcity in the market despite the glaring interest in the company’s shares.

Earlier this week, the NSE had come out in a statement to deny that it is complicit in the matter asserting that MTN met the minimum listing requirements of listing a minimum of 20% of its shares and that it would encourage MTN to make the shares available.

Analyst and people with strong knowledge of the Nigerian equities market have warned members of the investing public to be wary of buying the shares with understanding the intricacies of a direct listing which is very much different from an initial public offering, IPO.

MTN has not denied nor confirmed the incidence but its spokesman told reporters contacted him that the company will release a formal statement on the matter as soon as possible.

The EFcc has also given out an official statement to confirm nor deny the raid.

However, the agency must have acted on tips from whistleblowers or insider information.

For instance, before the listing took place, an investment analyst who pleaded anonymity told PageOne that most existing shareholders of MTN Nigeria are not willing to sell because many of them bought the stock at private placements where they paid far more than the current market price per share. He warned that they will continue to hold on to the shares before they offload it on the market, an event that could see the share price falling down very fast more than expected.

A person with the knowledge of the matter claimed that some shareholders paid as high as $18 per share (the equivalent of about N6,000) during a recent private placement. It, therefore, begs the question of why the share price continues to rise and shareholders are not selling.

There fears that the continuous rise the company’s shares could be forming a semblance of a bubble, a situation that could see the share price plummet if many early investors and shareholders sell their shares at the peak of the rise and many newer shareholders will lose billions of money.

Moreover, there are other technical details in the dramatic rise in share price that many people are not looking at.

An analyst at Stanbic IBTC Capital is of the opinion that the unprecedented rise in MTN Nigeria shares is going beyond logic and rational embers.

For instance, publicly-listed emerging market pairs of MTN Nigeria when compared using the enterprise valuation EBITDA(EV EBITDA- earnings before interest, tax, depreciation and ammortisation) are only trading within a ratio of 5 with an exception of Kenya’s Safaricom which trades at eight times its EV EBITDA because the company has other business units such as it MPesa mobile money business that generates high revenue for the company apart from its conventional telecoms business.

The analysts warned that because MTN Nigeria does not have these high revenue yielding products apart from its voice and data business, it is very illogical for its share price to be nearing such EV EBITDA ratio.

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