MTN’s $500m IPO foot-dragging linked to pre-election year jitters

With the second quarter of 2018 gone and the impending electioneering period, any official move by MTN Nigeria on initial public offering (IPO), which is a requirement to list on Nigerian Stock Exchange (NSE) will tantamount to an unwise business decision, according to analysts.

This explains the obvious foot-dragging by the telecoms operator pressured by the Nigerian authorities to list to fulfill an earlier agreement for the reduced $1.7 billion in a settlement with the Nigerian Communications Commission (NCC) over unregistered SIM card violation. According to market analysts who spoke to business a.m., data have shown that electioneering period in developing nations like Nigeria begets uncertainties and trepidations, which almost always cause devaluation of equities, loss of interest, and limit the confidence level of potential investors.

While IPO operates under the principle of demand and supply, these situations will have a huge negative impact if the largest network operator forges ahead this year, they stressed. By implication, MTN Nigeria would be on a thorny journey as a result of the timing as analysts say IPOs do not yield a promising result in a period when a presidential election is almost at the corner.

“I do not expect many international institutional investors to open their purses until the politics plays out,” Ndubuisi Ekekwe, a professor and young global leader at World Economic Forum told business a.m. “That will depress liquidity in the market and when that happens, prices of stocks go down. IPOs are never done in such occasions.”

He said listing on the NSE in 2018 would be regarded as carelessness considering the presidential election, which is on the horizon as elections in Africa typically bring uncertainties, triggering devaluations of equities across markets.

“So, for MTN Nigeria, I do think the strategists would move this IPO to Q2 2019 to happen after the election. If I am advising them, that would be the first point on slide. Going public in 2018 will cost you 15-20 percent because of the looming presidential election in Nigeria, which could depress international and Nigerian diaspora interests,” he concluded. However, political and market trends have shown that potential international investors usually come out to invest post election period, as this time guarantees some level of confidence due to stability in the economic policies.

To this end, MTN Nigeria stands a better chance of having a better valuation on its IPO following the outcomes of the presidential election in 2019. Gbenga Adigun, asset manager and cofounder at Graduate Skills Development Centre puts this in perspective: “There is always a high wave of optimism in the markets whenever there is a smooth transition of power.

A 2019 float would give MTN a better valuation.” Speaking on the matter, Peter Okoro, CEO at Bentorson Integrated Services, said venturing into a new business right now would not be a good idea for MTN as business activities are already feeling the pressure due to political uncertainties as associated with elections, adding that foreign partners don’t grant credit facilities anymore until maybe after elections 2019. MTN Nigeria has been on the move to list on the NSE since 2016 after agreeing to pay off a reduced fine worth $1.7 billion in a settlement with the Nigerian Communications Commission (NCC) over unregistered SIM cards without an official conclusion.

The news intensified a few weeks ago when different media outlets reported that MTN was almost concluding plans with the Security and Exchange Commission (SEC) to issue IPO in August, a reportage which warranted the NSE to issue a contradictory statement on its website. According to SEC, MTN Nigeria has not met the necessary regulatory demands by filling an application with the commission for it to review its plan to embark on an initial public offering (IPO) in Nigeria’s capital market. “Neither MTN Nigeria Limited nor any of its advisers or representatives has filed any application with the SEC regarding the said IPO,” the regulator said.