By Peter OBIORA investadvocate

Lagos (INVESTADVOCATE)-Transcorp Plc operating in the Conglomerates Sector of the Nigerian Stock Exchange (NSE) has reacted to the recent volume movements in the shares of the Company traded on Thursday March 31 2011 on the Floor of the Nigeria’ Exchange and called on the Securities and Exchange Commission (SEC) to investigate the transaction.

In a letter addressed April 01 2011 to the Director General (DG) NSE and obtained by investadvocate, the Firm affirmed that on March 31, 2011, a total of 2.51 billion units of its shares representing 10 percent (10%) of the Company’s issued share capital were traded in a single day, the largest volume of a Company’s shares traded in one day in the past one year.

In the letter, the Board of Directors and Management of Transcorp expressed shock at how such a transaction was approved by the Stock Exchange without information and consent of shareholders and the company.

The Board in the letter further said that they have been reliably informed by an individual that he has acquired a significant proportion of the shares of the company and plans to take over the business.

Transcorp affirmed that a transaction showing more than a five percent (5%) interest in the shares of the Company should ethically have been disclosed to Transcorp and SEC; but this was not done in this case.

“The Board and Management hereby object to such a transaction and request that due process and the provisions of law be allowed where an individual or group of individuals are interested in a controlling stake in the Company.

In the interest of over 300,000 shareholders of Transcorp Plc, this letter has been copied to the SEC which is hereby put on notice to investigate potential or actual market abuse in this regard” the letter said.

This is coming on the heels of a Report published on the Proshare’s website titled “Transcorp – Volume Movements indicate Possible Takeover Bid or Market Abuse”

The Report affirmed that on Thursday March 31 2011, 2.51 billion units of Transcorp Plc’s shares, representing 10% of its total outstanding shares (25 billion units) were crossed on the floors of the Exchange and no Market information was made available in this regard.

“This immediately raises concerns with us as this transaction, whilst confirming the analyst comments in our March 22, 2011 review – ‘What’s driving the resurgence of the Transcorp price?’; indicates a possible takeover bid or an abuse of market processes” the Proshare’s Report said.

Proshare affirmed that the stock closed on that day at N1.11k, a 122% YTD increase in price on the back of fundamentals aptly captured in the aforesaid report.

Basic Market Transaction Ethics

To buy at least 5% of a quoted company’s shares, the minimum requirement should, at the very least, follow the following market ethics:

1.    The NSE approved broker handling the transaction must enquire from the buyer his/her existing holding in the company;

2.    The broker must then proceed to review/add the volume of the intended transaction to/with the existing holding and determine if this goes above the 5% threshold (i.e. what is about to be bought and what is currently held);

3.    The broker is therefore obligated to inform/alert The Stock Exchange if the transaction is above the 5% threshold;

4.    The Stock Exchange must immediately alert the company of this intended trade, informing the buyer that it has done so;

5.    The company would then have a chat with the buyer to determine if it is a takeover bid or not, and to determine any interest such a person may have;

6.    The company must within 48hours get back to The Stock Exchange if they have any reservations or objections to such a transaction;

7. If it is a hostile takeover, the provisions of the ISA 2007 in respect of such would form the basis for moving forward.

These basic ethos provide a basic framework in which such transactions have and should be conducted. To have a 10% volume movement treated as just any other transaction is an abuse of the market processes.

Also, in the executive summary published, Proshare’s Report made allusions to the set backs in model, board constitution, debt overhang, management challenges and the political risks that confronted the institution which had been deftly managed, against all expectations, to deliver a company that appears focused and ready to deliver on its shareholder commitments.

The analysis sought to explain the raison d’être for the resurgence in the price of the stock. Since then (N0.81k) the stock has gained 37.04% (N1.11k) suggesting a sustained interest in it.

According to the Report, a cursory analysis of the prices and volume figures of Transcorp from January 4, 2011 till date reveals that the Volume as at March 31 2011 for Transcorp was exceptionally high (2.51 billion units) when its average volume traded during the year is 6.10 million.