Trapped funds in private placement: NASD OTC to the rescue
March 7, 2013 | 10:28 am| | | Start Conversation
Come May 2013, when it would be officially launched to the public, stockbrokers and other individuals who would be using Over-the-Counter (OTC) trading platform of National Association of Securities Dealers (NASD) will have access to unlimited liquidity in a very transparent manner. The NASD, which will encourage trading on commercial paper and others financials instruments, will be leasing the Nigerian Stock Exchange (NSE) trading platform.
This new platform, which is capable of delivering over N1.6 trillion in market capitalisation, will also focus on a whole lot of private placements that were not listed on the NSE. Over four years ago, funds trapped in private placement were worth over N800 billion. Currently, the NASD is capturing securities that were sold in the past as private placements, before it starts trading in options and derivatives.
In this market, investors will have two access points – first is the leased trading platform of the NSE, which only stockbrokers will have access to; and a web-based access point meant for investors across the globe.
The Securities and Exchange Commission (SEC) management came on inspection tour of the NASD trading facility Tuesday, and there are indications that the management of this alternative market is close to ceiling up deals with the Central Securities Clearing System (CSCS).
Ahead of the formal opening, this market will offer platform for investors to do deals after the first deal has been done in the next couple of days. Few months before the official launch of the platform, the management is confident that its board formation is capable of driving its optimism to absorb over 200 companies. Already, the NASD is seeing about N400 billion in capitalisation from 200 companies that it currently scouts and would be working with norminal advisers who will be setting valuation to these companies in this market.
There are revelations that many big local and international companies have indicated interest in trading their shares using the platform of National Association of Securities Dealers (NASD), sources close to the market told INVESTOR.
In addition to oil servicing companies, some of the identified companies are MTN, FrieslandCampina WAMCO Nigeria, Consolidated Breweries, Niger Delta Exploration & Production plc (NDEP), Fan Milk, and Resourcery plc – one of the leading information technology firm in Nigeria. These companies are big players in their various sectors.
For existing and prospective investors in these companies, the NASD OTC platform would be creating a market for these companies through two access points – first is the leased trading platform of the NSE, which only stockbrokers will have access to; and a web-based access point meant for investors across the globe.
According to our source in this market that currently has 64 shareholders who are primary investors and capital market operators, “we are happy with the development. These companies are all good companies. Though there could be a lot of sale-pressure in the couple of days as soon as there is a formal launch by May this year, there are going to be lots of turnover in this market.”
This market will create platform for companies that did private placements not listed. It is also expected that this NASD platform will create a new trading platform that will help brokers and other individuals have access to unlimited liquidity in a very transparent manner.
The formation of board members of NASD speaks volume about this market. The NASD board members are: Tola Mobolurin (chairman); Chike Nwanze (vice chairman); Bolaji Balogun (CEO, Chapel Hill Denham); Ade Bajomo (representing the NSE); Jibola Odedina (CEO of Marina Securities Limited); Sam Nwanze (chief investment officer of Heirs Holdings); Albert Okumagba (group managing director/CEO of BGL Plc); Abubakar Lawal (CEO of GTI Capital); Victor Ogiemwonyi (CEO of Partnership Investment Company plc); Kayode Falowo (CEO of Greenwich Trust Limited); Muritala Ariyo Olushekun (president, Chartered Institute of Stockbrokers), and Dipo Aina (managing director, Signet Investment and Securities Limited).
“The board has just been giving us a lot of support in terms of achieving our aims. For instance, Ogiemwonyi heads our technical committee; Falowo heads rules committee; Olushekun heads finance and general purposes, while Aina and Okumagba are respectively chairman and vice chairman of market development,” Bola Ajomale, managing director, NASD, had said.
“There are younger companies who are interested in the market but don’t have access, there is a market for them in this market. Remember this market is not a listing market. You just come, do your deal and move on. We are seeing about N400 billion in capitalisation from these 200 companies. These plcs that you see have all over the places, they are potentially tradable. The market will catch on very quickly. Though there would be a lot of sells pressure (share swaps). This will also herald right pricing. Our vision is to be open to everybody across the world. We will have a platform that is user friendly. We have reached the final arrangement with the NSE. We are going to be leasing part of their trading platform.
“With technology that we have this time, we hardly use all its capacity. Even when all combine, we will be using about 60 percent. We have developed a ‘bulletin board,’ which is our proprietary. Because everybody would like to have access to this market, to make that easy, we say lets open it on the internet for people to have access to the market. We are going to be working with norminal advisers as well who will be setting valuation to the companies in this market,” Ajomale said.
Having seen potential in this market, only four out of the nation’s 21 banks currently jostling for the trading settlement accounts of the National Association of Securities Dealers will be finally selected.
“We are not going to use all the banks. Our decision for only four banks is because we are just starting. There are some banks that we are not even talking to at all. This is because transparency and flexibility are vital elements in this market. Again, it is our vision to be open to everybody across the world,” Ajomale said.
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