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SPACs Losing Momentum as Investors Shy Away, Says GlobalData

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  • Special purpose acquisition company (SPAC) initial public offerings (IPOs) from Jan to Apr 2021 exceeded $87bn*
  • Valuations may rise, with many SPACs looking for targets in similar spaces
  • Key attractions include technology, media and telecoms (TMT); pharma; and sustainability

US stock exchanges saw a total of 301 SPAC IPOs priced, raising $87.6bn in the first 15 weeks of 2021, according to GlobalData, a leading data and analytics company.

SPAC IPOs set a new record in the first 12 weeks of the current year, having accounted for 77% of the total listings and 66% of the total capital raised. However, the so-termed ‘SPACulation’ seems to be fading away, evidenced by the sudden drop in capital raised by such IPOs from $11.5bn in week 13 to $0.7bn in week 15.

Keshav Kumar Jha, Business Fundamental Analyst at GlobalData, comments: “The slowdown in SPAC IPOs is the result of many factors, including increasing interest rates due to the revival in economic activity and optimism surrounding economic recovery in 2021, which could provide an opportunity for investors to consider investments with lower risk. SPACs typically bring risky propositions to investors’ portfolios as the capital raised is used for acquiring and merging with a private company and taking the company public, usually within 24 months.”

SPACs were the preferred tool to raise capital as traditional-IPO could not account for even one-third of total listing on both NASDAQ and NYSE in 2021 so far.

SPAC is a quicker and more economical way to go public. A company that intends to go public in the US could easily do so the SPAC way. This has attracted investors ranging from institutional investors and hedge-fund billionaires to Hollywood actors and private investors. Michael Dell raised $500m via MSD Acquisition Corp and Sir Richard Branson raised $350m via Virgin Group Acquisition Corp II.

Jha continues: “A number of SPACs with deep pockets are targeting similar companies that could inflate valuations and force them to raise money through other routes to fund their acquisition. However, failure to secure a merger within two years would require SPACs to return the money to investors.”

Apart from the sudden drop in SPAC listing, the performance of these stocks also remained lacklustre. Among the 301 SPACs listed in 2021 so far, only 1% were trading above 10% of their listing price and 16% were trading below the listing price as of April 9, 2021.

Jha adds: “SPACs could find it increasingly difficult to attract investors due to regulators’ actions to prevent SPACs from disseminating misleading information. The Securities and Exchange Commission (SEC) recently indicated that it would conduct traditional IPO-like scrutiny for SPACs to restrict them from providing overstated and misleading information to investors.”

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Nigerian Exchange Limited

Shares Reconstruction: Transcorp Lists Newly Reconstructed 10,161,997,574 Units of Ordinary Shares

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Transnational Corporation Plc (Transcorp) has delisted 40,647,990,293 shares from the Nigerian Exchange Limited on Monday and listed a newly reconstructed issued share capital of 10,161,997,574 ordinary shares.

In a statement seen by Investors King, the company said “We refer to our market bulletin with reference number NGXREG/IRD/MB73/24/10/10, dated 10 October 2024, wherein the Market was notified that trading in the shares of Transnational Corporation Plc (Transcorp or the Company) was placed on suspension effective, Thursday, 10 October 2024, in preparation for the share reconstruction of the Company’s Issued shares.

“The Market is hereby notified that the entire 40,647,990,293 issued shares of Transcorp were delisted from the Daily Official List of Nigerian Exchange Limited (NGX) on Monday, 28 October 2024, while the newly reconstructed issued share capital of 10,161,997,574 ordinary shares of 50 Kobo each were also today, listed on the Daily Official List of NGX at N44.2 per share.

“The delisting of 40,647,990,293 ordinary shares and listing of 10,161,997,574 ordinary shares on NGX is pursuant to the approval received from the Company’s shareholders at its Annual General Meeting of 27 May 2024 and the no-objection received from the Securities and Exchange Commission.

“Consequently, following the completion of the share reconstruction, the suspension placed on the securities of the Company has been lifted.”

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Nigerian Exchange Limited

Transcorp Gains 314.03% Last Week Despite NGX Closing the Red

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Transnational Corporation Plc (Transcorp), Nigeria’s largest listed conglomerate, gained N34.70 or 313.03% a share last week to close at N45.75 a unit after the company’s unaudited financial statement for the third quarter showed 352% year-on-year growth in profit before tax to N34.566 billion.

During the week, investors on the floor of the Nigerian Exchange Limited (NGX) transacted 2.717 billion shares worth N54.632 billion in 46,848 deals, against a total of 2.142 billion shares valued at N85.946 billion that exchanged hands in 41,217 deals in the previous week.

The Financial Services Industry led the activity chart with a combined 1.821 billion shares valued at N28.958 billion traded in 20,173 deals, therefore, contributing 67.01% and 53.01% to the total equity turnover volume and value, respectively.

The ICT Industry followed with 389.848 million shares worth N6.560 billion in 2,515 deals. In third place was the Conglomerates Industry with a turnover of 160.993 million shares worth N4.746 billion in 3,623 deals.

Fidelity Bank Plc, Chams Holding Company Plc and United Bank for Africa Plc accounted for 1.225 billion shares worth N17.721 billion in 4,912 deals and contributed 45.10% and 32.44% to the total equity turnover volume and value, respectively.

The NGX All-Share index closed the week in the red at 97,432.02 index points, a 2.03% decline from 99,448.91 index points recorded in the previous week. The Exchange year-to-date return moderated to 30.30%.

Also, the market capitalization of listed equities dipped by the same 2.03% from N60.261 trillion to N59.039 trillion.

Similarly, all other indices finished lower with the exception of NGX Banking, NGX AFR Bank Value, NGX AFR Div Yield, NGX MERI Growth, NGX MERI Value, NGX Oil & Gas and NGX Growth which appreciated by 0.19%, 1.76%, 1.52%, 0.16%, 0.48%, 1.15%, and 0.07% respectively while the NGX ASeM index closed flat.

Thirty-nine equities appreciated in price during the week lower than fifty-eight equities in the previous week. Forty-five equities depreciated in price higher than eighteen in the previous week, while sixty-eight equities remained unchanged, lower than seventy-six recorded in the previous week.

 

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Nigerian Exchange Limited

Naira Depreciation and High Interest Rates Force Market Slowdown, Experts Say

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Stockbrokers and investors have abandoned the equity market due to the Naira volatility, lack of market drive towards the end of the year,  and the high interest rate in Nigeria.

A long-time investor, David Adonri explained that the volume of trade usually drops towards the end of the year but the market normalises in January.

With the persistent drop in the value of the Nigerian Naira against foreign currencies, investors are wary of unfavourable currency conversion.

“The equity market reacts to so many things. The depreciation of the naira, which is around N1,700, of course, would impact the market. The foreign exchange position can make people exit the market and convert to hard currency, which is stronger, possibly to come back to the market when they see an improved currency level. That is what we call carry-over trade,” Adonri said.

“We also have the hike in the interest rate, which also causes financial assets to migrate away from the capital market,” Adonri added.

“Third, we are in the period of the year, where seasonally, the market is a little bit down because there is nothing specific to drive the market like full-year results or half-year dividends and so on. So we slide to a low tempo from September up to November until after Christmas the market starts trending up again,” he further stated.

According to a report by the Nigerian Exchange Group (NGX), equity investment transactions dropped in Q3, 2024 compared to the previous quarter of the year.

In the same vein, the National Bureau of Statistics (NBS) reported that capital importation showed that investors shifted from equity investment to portfolio investment.

The portfolio investment includes equity, bonds, and money market instruments.

With the recent shift, the portfolio investment made a 10.37 percent increase amounting to a $106.85 million gain from the N1.03 billion total capital inflow.

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