Stakeholders blame SEC for Union Bank’s rights issue failure

Some stakeholders in the capital market have blamed the Securities and Exchange Commission (SEC) for the failure of the Union Bank of Nigeria (UBN) rights issue. They said that failure of the offer was an indictment of the regulatory authority of the capital market. Mr Harrison Owoh, the Managing Director of HJ Trust and Investment Ltd., said that the commission should be blamed for approving the offer in spite of contentious issue raised by the bank’s shareholders.
He said that the failure of the offer would further erode investors’ confidence in the bank’s stocks and lead to sustained depreciation. Owoh said that it was illogical, given the timing of the rights issue and prevailing market circumstances then, for SEC to have approved the offer.

Similarly, Mr Boniface Okezie, the President, Progressive Shareholders Association of Nigeria (PSAN), attributed the failure to investors’ lack of confidence in the management appointed for the bank by the Central Bank Nigeria (CBN). He said that shareholders were surprised at the N6.81 price of the rights issue in spite of the market glut and huge losses suffered by investors in the capital market. Okezie said that many shareholder groups had, in a reaction to SEC’s and the bank’s management nonchalance over investors’ plights, advised their members against subscribing to the offer.

According to him, the UBN failure to pay dividend from its 2009 operations also irked the existing shareholders. He stressed the need for the bank to pay interest to investors on their monies tied down in the failed rights issue. Another shareholder, Alhaji Gbadebo Olatokunbo, said that the failure was a direct consequence of the bank’s inability to carry the stakeholders along in its recapitalisation bid. He also said that exploration of the full potential of core investors was more appropriate than the rights issue given the prevailing investors apathy in the capital market then.

NAN recalls that UBN offered existing shareholders of the bank 1.41 billion ordinary shares of 50k each at N6.81 per share in the ratio of five new ordinary shares for every nine ordinary shares held as at the Oct. 30, 2011. In the bank’s failed offer, existing shareholders only picked 15 per cent of the shares as against the stipulated 30 per cent subscription level. The current shareholding structure of the bank showed that the new core investor, Union Global Partners Ltd, owns 60 per cent while the Asset Management Corporation of Nigeria and investors hold 20 per cent and 15 per cent respectively.