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Retail Investors Adopt SPVs for Airtel’s N325.25b IPO

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airtel africa - Investors King
  • Retail Investors Adopt SPVs for Airtel’s N325.25b IPO

Retail investors have opted for the use of special purpose vehicles (SPVs) to aggregate funds and buy into the ongoing initial public offering (IPO) by Airtel Africa Plc.

Airtel Africa Plc is raising up to N325.25 billion in a combined global and Nigerian IPOs. Airtel Africa, the parent company of Airtel Networks Limited, Nigeria’s second largest telecommunication company, plans to list its shares on the London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE).

Airtel Africa, a subsidiary of India’s Bharti Airtel Limited, is offering between 501.13 million ordinary shares of $1 each and 716.41 million ordinary shares of $1 each at indicative price range of between N363 per share and N454 per share.

The IPO, being undertaken through a book building, is, however, restricted to qualified institutional investors and high net worth investors (HNIs). Under the rules in Nigeria, a high networth investor is defined as an individual with net worth of at least N300 million excluding automobiles, homes and furniture. This implies that only individuals and institutions with a minimum assessable investment of N300 million can participate directly in the IPO.

The IPO, which opened on June 18, 2019, is scheduled to close on Thursday June 27. The announcement of offer price, offer size, publication of the pricing statement and allotment of ordinary shares will hold on June 28, 2019. The allotment of ordinary shares and crediting of ordinary shares to the Central Securities Clearing System (CSCS) accounts of successful subscribers will take place on June 29 and July 3.

Airtel Africa is scheduled to be admitted to the official list and begin trading on the NSE on July 4. Already authorities at the NSE and Securities and Exchange Commission (SEC) have approved the listing of the resultant shares.

Checks indicated that investment houses have created SPVs which are aggregating subscriptions from retail investors. While the arrangements differ slightly, the investment firms appear to be using the same template for the SPVs, suggesting a sort of industry consensus on the approach to bypass the high net worth restriction.

Under the arrangements, the SPV will aggregate demand from retail investors and use its net worth to subscribe to the shares on behalf of the retail investors. Once successful and its account credited with the IPO shares, the investment firm will cross the shares into the CSCS accounts of the retail investors at the commencement of trading on the NSE.

The minimum share subscription by most SPV is 500 ordinary shares while the price is fixed at the ceiling of N454 per share, implying a minimum subscription of N227,000. Under the terms, the in-house allocation may be done on a pro-rata basis in the event of under allotment of the full subscription while the retail investors will bear all transfer charges. However, in the event that the clearing price is lower than N454, the excess amount will be refunded to the investors.

Experts who spoke on the SPVs said there was nothing legally wrong with the use of SPV to bypass the high net worth restriction, noting that the SPV is similar to collective investment by all the retail investors.

Nigerian market has substantial retail investors. Latest data from the NSE indicated that domestic retail investors accounted for 42 per cent of total domestic transactions at the Nigerian equities market. The five-month report ended May 31, 2019 showed retail investors led the market in two months.

SPVs are using attractive dividend policy to woo retail investors, who characteristically are usually excited by dividend-paying companies. Airtel Africa aims to distribute a minimum of 80 per cent of its consolidated free cash flow to its shareholders as cash dividend, subject to a ratio of net debt to underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between two times to 2.5 times being maintained. Dividend distribution is also subject to all regulatory, statutory and monetary restrictions.

The net proceeds from the IPO will be used to offset the company’s debt. The board of Airtel Africa said the IPO and the listing on the NSE would encourage operational discipline through the establishment of an independent capital structure and governance framework following the successful turnaround of the group’s operations.

According to the company, the IPO and listing would facilitate measurement of the group’s continued positive performance against holistic, publicly disclosed metrics as it enters a strong free cash flow phase.

The company is also expected to enter an optimal capital structure and enable improved leverage for greater flexibility in pursuing growth opportunities going forward while also having access to the capital markets and diversification of its capital base to support continued growth.

While the Nigerian offer shall be issued in Naira, Airtel Africa has avowed that the rights attaching to the shares allotted under the Nigerian offer shall be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the company.

According to the company, on a show of hands every holder of ordinary shares in the capital of the company who is present in person shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote per ordinary share.

Airtel Africa added that except as provided by the rights and restrictions attached to any class of shares, shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

“There are no restrictions on the free transferability of the Nigerian offer shares,” Airtel Africa stated, adding that no expenses will be charged by the company to any investor who purchases the Nigerian offer shares.

In its prospectus, Airtel Africa however cautioned that shareholders may be subject to exchange rate risk. According to the company, the investment by Nigerians may be subject to exchange rate risks.

“The ordinary shares are, and any dividends to be paid in respect of them will be, denominated in United States (US) dollars however the currency of issue is United Kingdom Pounds Sterling, for the Global Offer, and is naira, for the Nigerian Offer. An investment in the ordinary shares, by an investor whose principal currency is not US dollars, such as Nigerians, is exposed to foreign currency exchange rate risk. Thus, fluctuations in the exchange rate between Pounds Sterling and naira could materially and adversely affect the prices of the ordinary shares listed on the NSE. Any depreciation of US dollars in relation to the Naira currency will reduce the value of the investment in the ordinary shares or any dividends in foreign currency terms,” the company stated.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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MicroStrategy Rally Crushes Short Sellers, Wiping Out $1.92 Billion

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MicroStrategy- Investors King

Short sellers betting against MicroStrategy found themselves facing significant losses as the company’s rally wiped out $1.92 billion since March.

This development comes amidst a rally that has seen MicroStrategy’s stock outperform bitcoin, causing a considerable hit to those who had taken a bearish stance on the tech firm.

According to data from S3 Partners, short sellers have been on the losing end since March, as MicroStrategy’s stock surged, highlighting the impact of the rally on those betting against the company’s success.

This loss underscores the challenges faced by short sellers in a market where certain stocks experience rapid and unexpected price increases.

The rally in MicroStrategy’s stock is attributed to several factors, including the approval of several spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) earlier in the year.

This move by the SEC brought bitcoin, a once-nascent asset class, closer to the mainstream and fueled investor interest in companies like MicroStrategy, known for their significant holdings of the cryptocurrency.

MicroStrategy, which held nearly 190,000 bitcoin on its balance sheet as of the end of 2023, has indicated its intention to continue increasing its exposure to the digital currency.

The company’s decision to sell convertible debt to raise money for additional bitcoin purchases further bolstered investor confidence and contributed to the stock’s rally.

Analysts at BTIG noted that the premium for MicroStrategy’s stock reflects investors’ desire to gain exposure to bitcoin indirectly, especially those who may not have the means to invest directly in the cryptocurrency or ETFs.

The company’s ability to raise capital for bitcoin purchases is seen as a positive sign for shareholders, adding to the optimism surrounding its stock.

However, despite the recent rally and optimism surrounding MicroStrategy, the crypto industry as a whole continues to be heavily shorted.

Short interest in nine of the most-watched companies in the crypto space remains high, standing at 16.73% of the total number of outstanding shares, more than three times the average in the United States.

Moreover, concerns persist regarding the SEC’s stance on cryptocurrencies, with some experts suggesting that the approval of spot bitcoin ETFs may not necessarily indicate a broader acceptance of other similar products, such as spot ethereum ETFs.

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Geregu Power Plc Announces N14.46bn Profit in Q1 2024

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Geregu Power Plc

Geregu Power Plc has announced a profit of N14.46 billion for the first quarter (Q1) of 2024.

This represents a 307% increase when compared to the same period last year.

The power-generating company, known for its pivotal role in Nigeria’s energy sector, disclosed its outstanding financial results in its interim financial statement filed with the Nigerian Exchange Limited on Tuesday.

This disclosure comes shortly after the firm’s Deputy Chief Executive, Julius Omodayo-Owotuga, hinted at the promising financial outlook during the company’s recent annual general meeting held in Lagos.

According to the interim report, Geregu Power Plc’s revenue surged to N50.42 billion in the first quarter of 2024, representing an increase of 254.37% year-on-year appreciation.

The company’s net finance income transitioned from a negative position to N133.61 million. This positive momentum was supported by a moderation in finance costs, which decreased from N3.141 billion to N2.29 billion as of March 2024.

Speaking to stakeholders at the recent annual general meeting, Femi Otedola, Chairman of Geregu Power, expressed satisfaction with the company’s exceptional financial performance in 2023.

Otedola highlighted the board’s decision to propose a dividend distribution of N8 per share for the 2023 financial year as a testament to their commitment to rewarding shareholders and confidence in the company’s future prospects.

The robust financial results for the first quarter of 2024 further solidify Geregu Power’s position as a leading player in Nigeria’s energy landscape.

The company’s commitment to operational excellence, strategic investments, and adherence to international standards, such as obtaining ISO 9001 and 14001 certifications from the Standard Organisation of Nigeria, underscores its dedication to driving sustainable growth and value creation.

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Guaranty Trust Holding Company Plc Records N609.3bn Profit Before Tax in 2023

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GTCO Commemorates Listing on Nigerian Exchange - Investors King

Guaranty Trust Holding Company Plc (GTCO) has announced a strong profit before tax (PBT) of N609.3 billion for the 2023 financial year.

This represents an increase of 184.5 percent when compared to the previous year.

The audited consolidated and separate financial statements filed with the Nigerian Exchange Group and London Stock Exchange on Monday revealed market capitalization exceeded N1 trillion on the NGX to further solidify GTCO’s position as one of the top financial holding companies in Nigeria.

During the period under review, the group’s post-tax profit rose by 218.99 percent to N539.65 billion from N169.17 billion in 2022.

Key indicators such as loans and advances increased by 31.5 percent to N2.48 trillion, while deposits grew by 63.7 percent to N7.55 trillion.

The group’s total assets and shareholders’ funds closed at N9.7 trillion and N1.5 trillion, respectively.

Despite the challenging economic environment, GTCO maintained a strong capital adequacy ratio of 21.9 percent.

Also, the group sustained asset quality, with IFRS 9 Stage 3 loans improving to 4.2 percent in December 2023 from 5.2 percent in the same period of the prior year.

However, the cost of risk experienced an uptick, rising to 4.5 percent from 0.6 percent in December 2022, largely due to worsening macroeconomic factors.

Despite these challenges, GTCO’s pre-tax return on equity stood at 50.6 percent, while pre-tax return on assets was 7.6 percent. The cost-to-income ratio remained favorable at 29.1 percent.

Commenting on the financial results, Mr. Segun Agbaje, the Group Chief Executive Officer of GTCO, expressed satisfaction with the company’s performance amidst a challenging operating environment.

He attributed the strong performance to the successful implementation of the group’s business model across banking and non-banking business verticals.

“Also important to our success is our relentless obsession with innovation and offering great customer experiences as demonstrated by the successful redesign and upgrade of our mobile banking application, GTWorld,” he stated.

“In a landscape characterised by evolving regulatory reforms, global uncertainties, and heightened competition, we have continued to leverage our inherent strengths and capabilities to unlock significant value, creating more opportunities for the businesses and individuals we serve.

In line with its commitment to shareholders, GTCO announced a final dividend of N2.70k, bringing the total dividend for 2023 to N3.20k.

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