By Babajide Komolafe

Before you can sell your shares, they must be deposited in a Central Securities Clearing System, CSCS, account. For investors with share certificates, this means the shares must be verified. In the last edition, we explained this process, and stated that it could take as long as four months.

But having the shares verified, and deposited in a CSCS account is the first part of the process. The second part starts with the investor mandating the stockbroker to sell the shares. This is done by completing what is called, “Mandate Form”, where the investor states the number of shares to be sold, and the price at which they should be sold, and also the period within which the shares should be sold.

With this mandate, the stockbroker has authority to sell the shares, and then can include the shares among the ones he would offer for sale on the stock exchange. Now, most investors, especially retail ones, have this impression that once the broker is given mandate, the shares would be sold within 24 hours, and they would be able to receive the proceeds of the share sold next day. No, it does not work like that.

For the shares to be sold, there must be a willing buyer. That means if nobody is interested in buying those shares, the broker will not be able to sell. This can be a serious challenge and source of frustration for an investor, who needs money urgently. The expectation of such investor is that the shares can be turned to cash within 48 hours. It does not occur to him that without a willing buyer, the shares cannot be sold, and he can’t get the cash he needs urgently. Now, there are companies whose shares are always in demand.

There are always people willing to buy their shares.  Such shares can be quickly turned into cash.  But there are companies whose shares are rarely wanted by anybody. These are companies that have not declared any result, or companies that have no track record of profitability and dividend. An investor who holds the shares of such companies and wants to sell them to meet urgent cash needs would suffer heavy frustration, because after giving the broker the mandate to sell, it might take several weeks before he gets a buyer.

This explanation is in response to readers who have requested for assistance on how to sell their shares.  There is a particular company that sold shares through public offer in 2007, and till date has not declared result or conducted annual general meeting. As a result, the price of the shares has fallen to the nominal value. In fact, it rarely features on the daily transaction summary of the stock exchange. Some investors holding the shares of this company have requested for advice on how to sell the shares. Truth is nobody will buy the shares from you, including the promoter of the company.

Finally, after the broker has succeeded in selling the shares, he won’t give you the money in cash.