The Securities and Exchange Commission Halts Trading in Capital Oil, Afroil Shares
Source: Daily Independent
Trading in the shares of Capital Oil and Afroil has been suspended on the Nigerian Stock Exchange (NSE) to protect investors. The Securities and Exchange Commission (SEC), which ordered the suspension, has also informed all stock brokers not to deal in those shares.
A letter conveying the directive has been sent to NSE Director General, Ndi Onyuike-Okereke, according to SEC Spokesman, Lanre Oloyi, who explained in Abuja that the decision was taken upon discovery of a huge rise in the prices of the shares.
Besides, the two companies failed to render statutory reports, he stated.
Last month, the SEC launched an investigation into the unusual price shifts in the shares of Capital Oil and Afroil, and Oloyi said this led to the stoppage of trading in them.
“The investigation established that during this period they were not in business, as there was no activity whatsoever in their premises. The (SEC) has declared that the basis for continued trading and rise in the prices of their shares on the floor of the NSE no longer exists. The investing public must not be deceived. “The SEC, therefore, added that pursuant to its findings on the two companies and its mandate in protecting the investing public, trading in the stocks of the companies is suspended immediately,” he said.
Between 2001 and 2006, Afroil was wound up by a Lagos Federal High Court order (dated March 30, 2001) when it could not pay its debts. But the order was vacated in March last year, following the decision of KS Fund Managers (one of the creditors) to take over the responsibility of paying other creditors, while the company is returned to KS Fund Managers. The warehoused shares were in the custody of the company’s management. Afroil did not notify the SEC and the public, and its shares remained quoted and transacted on the NSE.
According to the SEC, a stock brokerage firm, Reward Investment, sold 20 million units of the warehoused shares between April 19 and December 6 last year, ranging in price from N2.20 to N6.47. PSL Securities sold nine million units between December 21, 2007 and January 24, 2008 at between N9.12 and N13.76 per share. “Even during the investigation of the company,” Oloyi added, “it was discovered that a new mandate order was given by the company’s management to PSL requesting it to sell another 11 million units. “The (SEC) found the sale of the warehoused shares within this period as quite anomalous, as it ceased to be a going concern between 2001 and June 2006 while it returned to going concern status on March 3, 2007.”
He said by the winding up order, the shares should have been de-listed from the NSE. “The SEC noted the actions of the management of Afroil Plc as acts of insider dealing and price manipulation, and therefore a breach of Rule 110 of the Commission’s Rules and Regulations.
“In addition, the manner of the sale of the company’s warehoused shares was a total breach of the provisions of Rule 70(2) of the Commission’s Rule and Regulations, which states that warehoused shares be sold en-bloc, while the broker renders periodic reports on it.”
Afroil accessed the capital market in 1993 through an Initial Public Offer (IPO) for subscription of 165 million ordinary shares of 20 kobo, at 40 kobo per share. The offer was undersubscribed by 42.26 per cent or 69.73 million shares, which were warehoused for disposal on the NSE.
The SEC explained that Capital Oil had the same experience as Afroil but there was no evidence that it went into liquidation. It confirmed that Capital Oil is not in active operation and only occupies an obscure office in Ikeja, Lagos. “The (SEC), however, found that what triggered the volume of transactions in the company’s shares was the sale by Five Star Asset Management of (its) 38,708,520 shares (on the NSE) to APT Securities, at N1.39 and the firm subsequently did a cross deal of 70 million shares at prices ranging from N3.53 to N11.68.
“The transactions were executed between December 12, 2007 and January 28, 2008. The sales were made to various clients. However, the (SEC) noted that the Chairman of Capital Oil also sold 8.25 million of his holding within the same period. “In view of the fact that (he) was an insider, he was quite in the picture of the company’s situation, and in fact knew that the prevailing share price is without rational basis, and therefore unsustainable when he went ahead to sell his holding. “The (SEC) considers his action as an insider abuse, allegedly taken to minimise his loss and maximise his gains from the price surge, aware that the company is not in operation.”
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