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Rights Issue will shield banks from hostile takeovers – Onukwe

Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), Sam Onukwue,has said the implications of Right Issues as an option for capital injection…

Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), Sam Onukwue,has said the implications of Right Issues as an option for capital injection by banks is one way to give the existing shareholders the privilege of enhancing their shareholdings, before reaching out to outsiders.

Reacting to moves by several banks to inject capital as part of the recapitalization project, Onukwe in an interview with Nairametrics said the right issue will protect the company from a hostile takeover if the shareholders take their rights.

He said: “But it is a double-edged sword if many do not participate. Although such shareholders can trade their rights, it may open doors for a takeover.

Also speaking on Public Offer, Onukwue said a Public Offer will enable a company to attract new shareholders while it creates an opportunity for the existing shareholders to increase their holdings.

He said: “In this era of electronic offering, millennials, Gen Z and other categories of young ones may participate if the offer is well-publicized. This capital-raising technique will enable the banks to raise huge amounts of money.”

He said a Public Offer has the capacity to enhance a bank’s visibility and boost its reputation.

“It also ensures transparency and there are disclosures that banks must comply with when seeking approval from the regulatory authorities. This enhances investor confidence because the processes are transparent. “Speaking on how to  attract Millennials, Gen Z, and Gen Alpha under the recapitalization programme, he said the gateway to attracting these categories of investors is to deploy digital innovation for convenience.

He said: “We refer to Millennials, Gen Z, and Gen Alpha as digital natives who prefer seamless online experiences and mobile banking solutions. Every bank invests in user-friendly mobile apps.

“By this, banks can cater to the tech-savvy preferences of these generations. Deployment of technology was a paradigm shift three years ago when MTN deployed an electronic Initial Public Offering (e-IPO) and it was successful.

“Fortunately, NGX in its continuous efforts to enhance investors’ access and experience in the market is working on deploying a gateway that will attract this category of tech-savvy investors.”

On the readiness of the  Capital Market to absorb banks’ offer to raise huge amounts, he said: “This is about investor appetite for the company’s shares, Investors buy into the future of a company. The current performance of a company is historical.

By virtue of their services, banks occupy a very key position in every economy. They provide an efficient payment system and enable individuals and corporate entities to transact businesses.

Investors are comfortable with a bank that operates professionally and has a track record of corporate governance, the trajectory of profitability, and shareholder value through regular payment of dividends and capital appreciation of its shares in the secondary market amongst others. ”

The current financial performance of many quoted banks on NGX is encouraging.  Investors will not hesitate to invest in the shares of a company that has strong fundamentals.

Share prices of many quoted banks on NGX are undervalued, hence high net-worth investors are out there to increase their portfolios with bank shares.

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