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 NGN13.63 (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.