Just want to know your opinion about the fraudulent and unethical  "share reconstruction" carried out by Sterling Bank Plc. Is our capital market that bad that a quoted company will carry out a share reconstruction that leave the shareholders worse-off.

To make the matter worse, the NSE concurred with Sterling Registrar on the matter and abondon their Duty of Care to protect the interest of investors. How can someone like myself, that bought into Sterling Bank on the secondary market of the stock exchange (in "good faith" and in a "market overt"), be asked to accept 10 units of shares for every 19 units that I previously held in the bank (about half of my holding disappeared from my cscs statement).

To add insult upon injury, the price was marked down below the suspension price i.e. N6.65 reduced to N5.62. The issue is that Sterling bank did not summon any extraordinary general meeting (EGM) to notify us about the development. Neither did they call any Court Ordered Meeting for such a decimating capital reconstruction. The MD and the Chairman of the company lied to us at the last AGM that they were the first bank, post-consolidation, to have written off their goodwill in full, hence, the reason for not paying any dividend in this financial year.

Someone has to pay for this, I even think those directors of the banks involved in the merger and consolidation fraud, as alleged, should be languishing in jail by now. I trust the US. government on matters like this. We've got to do something about this otherwise it becomes a precedence in Nigeria.

These are executive robbers. Below is what I wrote about my personal experience.

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NSE Connives with Sterling Bank to Cheat Unsuspecting Investors

Please permit me a space in your widely read newspaper to express my dismay at the daylight robbery that recently occurred on the Nigerian Stock Exchange.

Sterling bank on September 3rd re-listed its shares on the floor of the Nigerian Stock Exchange after they had been placed on full suspension (on July 11th) to enable it do a share reconstruction.
Judging by what appeared in my CSCS account the bank had issued 10 new shares to replace every 19 old shares (my previously held 700,000 old shares were replaced with 368,421 new shares). Since the stock last traded at NGN6.65 when it was placed on full suspension, I expected the price to be adjusted upwards to NGN12.63 (i.e. NGN6.65/10*19). This did not happen; instead it was re-listed at a lower price – NGN5.36.

I know of other investors whose shares were also adjusted downwards. Neither the bank nor any regulatory authority has deemed it fit to explain to the investing public the abracadabra re-construction that was done on the shares of this publicly quoted company.

Upon enquiry from my stockbroker, I was informed that a clarification was made on the Floor to them on Thursday, September 4th, that no further price adjustment would be made because Sterling bank corrected a fraud which occurred at the time of merger when some of the legacy banks got more than their fair share of equity in the new bank – Sterling Bank.

The General Manager/Head in charge of Quotations, Mr. Binos Yaroe,was reported to have said that during the consolidation process that led to the formation of the bank, there had been improper valuation of the company’s shares adding that the share price was therefore marked down because over 13 billion shares of the company had been wrongly allocated to certain parties in the merger process, without a consequent inflow of fund into the company.

The question is if certain (known) parties were wrongly allocated shares, couldn’t the bank and the regulatory authorities request these parties to refund same or better still bring in funds to match what they were allotted?

This is a clarion call to the authorities – the Central Bank of Nigeria, the Securities and Exchange Commission, the EFCC, ICPC and all relevant bodies – to intervene in this matter to ensure that the innocent investor is not cheated.

If this intervention is not made; foreign investors may find it hard to trust the Nigerian capital market again.

Worried Investor.

I believe we should fight this daylight robbery, they are just coming up with lies as excuses, just give them two months they will come back to the floor, pay or promise some people certain percentage and then apply for a public offer. The regulators are suppose to be mentors but I can't differentiate them from people who raid banks, the only difference is that gun is involved in one. We need to fight this. Does anyone have an idea how we can collectively or individually persuade this criminals in suits to stop this satanic act and do what is right?.

Sterling Bank Explains Share Reconstruction
By Abiodun Eromosele, 10.07.2008

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Perturbed by several complaints by investors about the recent share reconstruction embarked upon by Sterling Bank Plc, the bank's board of directors has clarified issues on the process.
The board, in a statement made available to THISDAY, said the reconstruction exercise was carried out after due diligence and approvals from regulatory authorities.
Specifically, the bank said: "the five banks that merged into Sterling Bank, entered into a scheme of merger, sanctioned by the court, which provided for two key review exercises to be undertaken in order to, whereby necessary, adjust the relative pre-merger values of the legacy banks. The two review exercises prescribed in the scheme were:
"A close-out audit of the accounts of each of the legacy banks as at 31st December 2005: to take into consideration and compensate pre-merger shareholders for changes that had occurred to the legacy banks' values since 31st March, 2005, when due diligence was conducted on the banks, i.e. the cut-off date for the merger.
"Post-merger adjustments: to further compensate pre-merger shareholders of the legacy banks, for material changes attributable to any of the legacy banks, provided that the aggregate value of such material change exceeded N100 million.”
The bank explained further that each of the legacy banks appointed a firm of auditors/ consultants as its shareholders' representative. "The five shareholders' representatives, who derived their power from the court sanctioned scheme of merger, submitted a report dated 13th March, 2007 wherein they unanimously recommended the issuance of additional 13,317,026,285 ordinary shares as compensation shares to be issued to the various shareholders of the legacy banks who hitherto, were the holders of 10,552,847,651 ordinary shares of the bank."
“Also the shareholders' representatives, mindful of the implication of almost 24 billion shares in issue also recommended a reconstruction of the entire shares. The shareholders of the bank, at the 45th yearly general meeting held on 28th August, 2007, approved a resolution for the reconstruction of the entire shares of the bank that is 23,869,873,936 ordinary shares of the bank,” the statement explained.
In the statutory notice of the yearly general meeting, which was published in at least two national daily newspapers, the bank noted that it was specifically stated under special business, among others, “to consider, and, if thought fit, to pass the following resolutions as special resolutions: resolution10:'that the directors be empowered to reconstruct the bank's shares as a result of the post-merger share adjustment in accordance with the approved scheme of merger on the basis, terms, and at a time to be determined by the directors. This resolution was unanimously approved by the shareholders.”
The statement added: "the two key regulatory agencies, the Nigerian Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN), in September 2007, separately wrote to the bank to invoke the clause relating to the close-out audit share adjustment in the scheme of merger to compensate the shareholders of the legacy banks as recommended by the shareholders' representatives.
"The Board of directors of the bank consequently applied for regulatory approvals to issue the compensation shares and simultaneously reconstruct the shares from the CBN, the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE); all the approvals were obtained.
"The bank subsequently placed the shares on total suspension from daily trading in order to effect the issuance of compensation shares as well as the reconstruction of the shares of the bank. This reconstruction was carried out at a ratio of 10 new shares for every 19 existing shares.
"It is true that the reconstruction of the original 10.5 billion shares (10 for 19) should have led to a simultaneous doubling of the share price; however, the issuance of the additional 13,317,026,285 compensation shares (also reconstructed) automatically diluted the expected effect. "The situation was further exacerbated by the current bearish market."
The bank assured the shareholders that the merger/integration process has been completed and the financial institution "is on course to deliver superior return on investments and enhance shareholders' value."