Within the last four years, each of the five banks that were recently bailed out (the number had since increased to 8) by the Central Bank of Nigeria (CBN) had come to the market canvassing for investors’ stake in their companies.
There offer documents, sanctioned and approved by the market regulators, showed promises of ample returns both in form of dividend and capital appreciation which was premised on the potentials of their banks to grow earnings.
These financials were backed by fundamental and technical information that made it such a market wave and the market rode successfully till now.
In assessing what investors have gained or lost within that space of time, Analysts at Proshare Limited, using a hypothetical figure of 1million units as a particular investor’s public offer subscription and allotment arrived at the following scenario:
Afribank
Afribank’s offer at N25 per share would amount to N25.000 million by August 14, 2009 before the CBN pronouncement, the price of the stock had come down to N5.22 per share resulting in N5.220 million (Loss of N19. 780 million). This loss could be attributed to the general market crisis which is peculiar to all the listed companies on the exchange depending on the investors’ perspective. The percentage resultant loss from the offer price to August 14 on Afribank equals 79.124 percent. The loss the stock experienced between August 14 to November 24, 2009 amounts to 63 percent. As at November 24, 2009, investors into Afribank plc public offer have lost 92.28 percent of their investments, having only 7.72 percent remaining. Assuming the fund was invested in let say bond with an annual coupon rate of 10 percent, the investors would have made N5.0 million plus the initial investment which amounts to N30 million.
Therefore, the actual loss the investors have incurred if this alternative investment is considered is (-92.28 percent plus N5.0 million he could have earned from other investment).
FinBank
FinBank’s offer at N9.50 came down to N1.55 as at August 14, 2009 showing 83.68 percent loss. Between August 14 and November 24, 2009, the investment had come down by 55.48 percent. From offer price to November 24, 2009, the value of the investment has suffered diminution by 92.74 percent.
Assuming an annual coupon rate of FGN bond at 10 percent in the last two years of the offer, the investors would have gotten N1, 900,000 plus N9, 500,000 initial investment. The actual loss in this regard equals 92.74 percent plus N1.900 million that could have been earned.
Intercontinental
In the case of Intercontinental Bank plc, the public offer at N13.50 declined to N6.93 as at August 14, 2009, recording 48.67 percent loss.
The loss recorded in the stock between August 14 and November 24, 2009 equalled 67.97 percent, above the loss to August 14. The diminution in value to November 24, 2009 stood at 83.56 percent.
Considering the alternative investment of FGN bond at annual coupon of 10 percent, investors would have earned N4.050 million plus the initial investment. The actual loss in Intercontinental Bank’s public offer stood at 83.56 percent and N4.050 million that could have been earned.
Oceanic
Oceanic Bank plc public offer price of N16.50 dropped to N4.94 as at August 14, 2009 to record a loss of 70 percent. The loss between August 14 and November 24 2009 equalled to 54.25 percent and the loss to November 24, 2009 amounted 86.30 percent. Investing in FGN bond at annual coupon rate of 10 percent with the money would have yielded N3.3 million.
The loss therefore is 86.70 percent diminution plus N3.3 million not earned.
Union Bank
Union Bank offer price at N36.00 declined to N12.60 as at 14 August showing 65 percent decline. The loss recorded between August 14 and November 24, 2009 amounted to 51.27 percent and the total loss to 16 November, 2009 was 82.94 percent. Investing in FGN bond at an annual coupon rate of 10 percent would have fetched N10.8 million. The real loss therefore stood at the 82.94 percent decline plus N10.8 million not earned. The hypothetical scenario presented above showed the great blows that had been dealt on investors’ holdings in the affected banks.
