By Michael Eboh
Following calls byÂ the Nigerian Stock Exchange (NSE) and other stakeholders in the Nigerian capital market on the need for banks, insurance companies and other quoted companies to reconstruct their shares to manageable level, an expert in the Nigerian capital market, Mr. Tunde Adeyemi, has called on the regulatory authorities to adopt an industry-based capital restructuring approach in this regard.
He also bemoaned the effect the high number of issued shares posed on the earnings of quotedÂ companies.
According to Adeyemi, who is a Senior Research Fellow, Davids Business Academy and Managing Director, DHTL Capital Management Limited, there is an urgent need for the authorities in the capital market to review their listing and post-listing requirements, pegging the number of issued shares for each sector in the capital market.
He noted that pegging the maximum number of shares to be distributed by quoted companies, will help guide the companies in the reconstruction of their shares and also help increase the value of the companies.
He said, â€œThe NSEâ€™s decision to increase the nominal value of shares to N1, is a step in the right direction, but is not the only step to be taken in ensuring a proper share reconstruction exercise by these companies. There is the need for the authorities to introduce an industry-based capital restructuring, pegging the number of issued shares in each sector. This will guide the companies in undertaking share reconstruction and will help give value to their shares.â€
He also called for an effective regulation that will help protect the companies undertaking share reconstruction and investors of these companies, especially in the further drop of the share prices.
He noted that the regulatory authorities should put a peg on prices of reconstructed shares, making it impossible to fall below certain a price for a period of two year after the reconstruction exercise.
He noted that a reduction in the number of issued shares of quoted companies, will reduce dumping of shares of quoted companies, make the shares attractive to foreign portfolio managers and boost the Earnings Per Share (EPS) of companies in the market.
â€œThere are numerous advantages attached to share reconstruction, it will increase the earnings power of the companies, reduce dumping, attract foreign portfolio managers, it will encourage people to want to hold shares for a long time and will also boost the EPS of companies in the market.