As more companies opt to exit the Nigerian Exchange (NGX), minority shareholders are increasingly voicing dissatisfaction with the treatment they receive during these transitions.Â
Their major grievance centers on inadequate compensation, which many argue does not reflect the real value of their investments. This growing frustration is unfolding against the backdrop of ongoing or completed delistings by firms such as Flour Mills of Nigeria Plc, MRS Oil Nigeria Plc, Wapic Insurance, and International Energy Insurance Plc, with Lafarge Africa Plc reportedly next in line.
Delisting is not unusual. Companies may go private to streamline operations, reduce regulatory costs, or restructure. However, the process has raised red flags among smaller investors who feel sidelined and underpaid. These shareholders often invest with long-term expectations, only to find themselves edged out with little room for negotiation when majority owners decide to take the company private.
Although the Securities and Exchange Commission (SEC) has established rules to protect minority investors, critics argue these rules are not strictly enforced. Consequently, controlling shareholders can steer delisting terms in their favor, often offering exit prices that fall short of the company’s actual or potential market value. The perceived imbalance has led to growing calls for reforms to improve fairness, especially in exit pricing and shareholder engagement.
A central point of contention is how exit prices are calculated. Under current guidelines, companies can base their offer on a 60-day average of trading prices before filing for delisting. However, with regulatory approvals often taking months, this benchmark may be outdated when shareholders vote, especially in a volatile market. This was notably evident in the case of Coronation Insurance, where the company initially offered 65 kobo per share. When the meeting to approve the delisting was held, the stock had risen to over 85 kobo, leaving many investors feeling significantly undervalued.
Investor advocate Patric Ajudua, President of the New Dimension Shareholders Association of Nigeria, criticized this method, noting that it fails to account for inflation, market dynamics, or investor sentiment. He emphasized the need for a more responsive pricing mechanism that reflects current realities when decisions are made, not outdated averages.
Similarly, Moses Igbrude, who leads the Independent Shareholders Association of Nigeria, pointed out deeper structural concerns. He argued that some majority shareholders may deliberately allow businesses to underperform, only to buy out minority investors at lower prices before reviving the company privately. He cited examples such as NBC and Seven-Up, which reportedly rebounded quickly after delisting, raising doubts about the accuracy of the financial distress presented during the buyout phase.
Even more worrying is the lack of transparency in managing unclaimed buyout funds. In many instances, these funds remain with third parties who offer little clarity on how they are handled, further eroding investor trust. This issue is compounded by the recent setup of Nigeria’s Unclaimed Dividends Trust Fund, which some investors fear may centralize these funds without proper accountability.
To restore confidence in the Nigerian capital market, minority shareholders urge regulators to introduce stronger oversight and more inclusive processes. One proposed solution involves assigning independent third parties, jointly selected by both majority and minority shareholders, to oversee delisting activities. Under regulatory supervision, this approach could help ensure that all parties receive fair treatment and restore trust in capital formation through public markets.
Recent clashes involving Coronation Insurance and PZ Cussons Nigeria Plc underline the urgency of these reforms. Both companies faced heavy pushback from minority investors who rejected buyout offers they believed undervalued their stakes. These events show that Nigeria risks deterring future investment and weakening its capital markets without stronger protections and more balanced corporate governance.
