Your company must ‘Get Up and be Counted’ on the Stock Exchange

 By: Seth Q. Ofori, SIC Financial Services Ltd.

A rich chief tax collector called Zacchaeus was seeking to see who Jesus was when Jesus went to Jericho and was walking through. According to Bible accounts, Zacchaeus found it very difficult to have a glimpse of Jesus because of the large crowd as he was small in size. So he ran ahead to an advance position and climbed a fig-mulberry tree in order to see him, because Jesus was about to go through that way. Clearly, Zacchaeus did not want to be left out of getting a glimpse of Jesus -- hence he needed to be smart, put in extra effort and to act fast so as to avoid being left out.

Naturally, nobody wants to be left out in society; everybody wants to move along with their peers and would do everything possible to achieve their aim. Sadly, that is not the case for some companies listed on the Ghana Stock Exchange. As to whether they are being left out or they are leaving themselves out is a question we all have to find answers to. There are thirty-four companies listed on the Ghana Stock Exchange, but not all of them are receiving equal investor attention.

Undeniably, all the stocks cannot attract equal investor attention. Although they are all listed on the same exchange, they are different companies operating in different sectors and in different environments under different regulatory regimes. This situation is wisely justified by Aristotle when he stated that, ‘the worst form of inequality is to try to make unequal things equal’.

Hence, we cannot attempt to unfairly suggest that all the listed companies must follow the same price trends at the same time all the time. Even so, bulls markets which are characterised by optimism, high investor confidence and expectations that strong results will continue, somehow work for a good number of listed companies at the same time. Although it is difficult to predict consistently when the trends in the market will change, part of the difficulty is that psychological effects and speculation sometimes play a large role in the bullish stock markets. Investors are always excited with a bullish market, regardless of the sectors their listed companies belong to.
Comparatively, out of the thirty-four listed companies on the Ghana Stock Exchange, some have not recorded a single trade for over eighteen months. In my opinion, these companies are clearly not getting up to be counted. The Stock Exchange is a secondary market where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system. If it is true that the stock exchange is meant to provide an exit platform for shareholders, then imagine what the shareholders of the companies whose shares have not traded for a long time have been going through when they need money to pay school fees or pay the funeral expenses of a loved, deceased person, among other reasons for exit.

General stock market activity requires that prices move up or down or remain unchanged when shares exchange hands. Although every trade is not characterised by price movements, movement of shares from one investor to another is a primary function in the very existence of a stock exchange -- and price movement becomes secondary. Imagine a scenario where none of the thirty-four listed companies registers a single trade on the exchange in a whole year.

Happily, though, the Ghanaian stock market is quite active and exciting these days, because there has been a significant increase in trade volumes with a corresponding increase in the magnitude of changes in prices of shares. This has resulted in an impressive appreciation in prices of shares of most listed companies. Indeed, proud shareholders of these companies have recorded gains ranging from 7% to 82% while the mechanism that measures the performance of the Ghana Stock Exchange, (the GSE’s Composite Index) has recorded over 54% gain from January to-date. Although stock prices of some of the companies have recorded price depreciation, some have recorded no movement as in most cases there has been no trade in the shares of those companies. Logically, it is expected that most listed companies do well to record some market activity, especially when the larger market is in a ‘bullish mood’.

Ostensibly, trades occur when there are shares offered for sale with equal interest to buy those shares. Again, interest to buy shares is normally stimulated by several factors including the release of price-sensitive information about the company’s activities, its future prospects and its financial wellbeing. Sharing of information about public companies with investors is an essential component to the investment decision-making process by investors. It is said that ‘a cat is not priced when it is hidden in a sack’. The buyer must certainly see what he is buying; that way, he can effectively get a good bargain to guarantee value for money.

The least directors of companies that are not getting up to be counted on the stock exchanges can do is share information with their shareholders and the investing public -- whether such information is good or bad. Whatever the case, investors have a basic right to information so as to make decisions. That right must not be trampled upon. The natural investor reaction to non-disclosure of information is a boycott of the shares of that company on the market, and this largely accounts for the little activity in the shares of such companies.

However, the process cannot be completed one-sidedly; buyers are needed as much as sellers. Essentially, there are several ways by which companies can stay in touch with shareholders through the provision of information. This can be done through press releases, press conferences, or by appearance on the Ghana Stock Exchange’s ‘Facts Behind the Figures’ programme among others. These are fine and inexpensive platforms available for management to interact with investors.

Zacchaeus might not have been an expert in tree-climbing, but when necessity demanded it he rose to the challenge and found himself on a tree high enough to get himself noticed by Jesus. He certainly achieved his aim and even got rewarded by Jesus. Companies listed on the Ghana Stock Exchange must be willing to go the extra mile to share price-sensitive information with investors.

They must draw strength from the effort put into the Initial Public Offering (IPO) exercise of their shares to raise money. If companies recognise their statutory and moral obligations in the provision of information, they will realise that it is not a favour but rather a duty and respect of investors’ right when they start seeing the results of their effort.

Cross Listing Of Multinational Companies On The African Stock Exchanges.

What is cross listing?
Cross listing is the process where a company lists on more than one stock exchange. Listing on new stock exchanges implies that the services of lawyers, underwriters or lead brokers, auditors, registrars and services of financial valuers be sought. These come with huge costs that are likely to scare the company in question. Cross listing on an exchange brings a lot of benefits to the investing public, the cross listed firm, the host exchange and the political landscape. It as well comes with challenges if the relationship is not well managed. This article seeks to discuss the challenges of cross listing, its impact on the host exchange, reasons why companies cross list and who the principal gainer is using examples on the Ghana Stock Exchange.

Hustle of cross listing companies
Despite the cost of listing on an exchange, some companies choose to list on different stock exchanges for various reasons. The cost of printing prospectus and other promotional activities are also hurdles to scare the company concerned. It also implies that, the cross listing firm in Ghana is ready to pay all the listing fees and comply with the entire listing requirements spelt out by Securities and Exchange Commission(SEC), the Ghana Stock Exchange(GSE), the Registrar of Companies and Bank of Ghana(BoG) if applicable.

Uncertainty looms in such a firm, as to whether the initial public offers would be successful or not. Nobody really knows. There have been instances where companies incur so much cost of printing prospectus, placing heavy media advertisement, paying for services of financial valuers, reporting accountants and auditors but their offers were not successful. The most recent uncertain listing on the Ghanaian market is that of Comet Properties (a real estate company in Ghana). Comet’s unsuccessful listing on GSE emphasizes the real difficulty for firms to list on an exchange.

Despite the uncertainty of the offer, most brave companies defied all odds and tried to list not only on one stock exchange but two or more. The process of listing on more than one stock exchange is cross listing. AngloGold Ashanti, Tullow Plc, Golden Star Resources and Ecobank Transnational Incorporated are examples of cross listed firms on the GSE.
The above listed companies are into exploration of natural mineral except Ecobank Transnational Incorporated, (ETI) which is a multinational bank that offers financial services. A traditional rendition of the strategic nature of cross listing is properly captured in a Nigerian proverb; “a toad does not move out in the day for nothing but in search for something vital”. AngloGold Ashanti is listed on four stock exchanges and Golden Star Resources is both listed on the Canadian and the Ghana Stock Exchanges. ETI is listed on the Nigerian Stock, BRMV and the Ghanaian Stock Exchange. Tullow Plc Ghana, which features mostly in this article, is listed on three stock exchanges in different continents.
Impact Of Cross Listing
Impact coefficient Positive Negative
Investing public More investment opportunities
Sense of belonging and association with listing brand/firm
Smaller shareholding means less control over major decision
Less control over market fluctuations and share price control
Company Additional source of funds/capital
Good risk management option
Political and social acceptability Extra cost of managing extra shareholding
Potential currency translational risk due to currency conversion/fluctuation.
Cross border brand management challenges due to existence in more than one market with distinct features.
Political More opportunity to regulate the operation of the listing firm
More revenue for SEC and GSE---market capitalization goes higher
A political plus as good investment destination, credit,
Increase in tax receipt Repatriation of profit to foreign country/mother company



Social Domestic Employment opportunity
Urgency in Social responsibility activities in operating sector/region

Technological Transfer of technology and to new listed market


CROSS LISTING IN AFRICA
The cross listed firms on African stock exchanges, with presence in Ghana
• Tullow Plc: Tullow Plc got listed on the Ghana Stock Exchange in 2011.
• ETI: ETI got listed on the GSE in 2006
• AngloGold Ashanti is listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) Australian Stock Exchange (ASX) and the Ghana Stock Exchanges (GSE).
• Golden Star Resources is also listed on the Canadian Stock Exchange and the Ghana Stock Exchange in 2009.

General Reasons Why Companies Cross List
• Generate more capital
Raising additional capital to fund a large corporation’s business can be tougher, especially if the capital raised needs to be transferred to another country for business operation. It becomes difficult as rules and regulations inhibit successful transfers of such funds. In the case of Tullow Plc’s IPO in Ghana, cross listing in the Ghanaian market pooled about 109.5 million Ghana Cedis ($72.3m). This was successful mainly because of higher confidence Ghanaians had in the Tullow brand to contribute more capital to explore the oil wells in Ghana. The investor confidence plays crucial role in the success of the initial public offer. Investors largely invest based on both sentiments and facts. The sentimental part is a sense of ownership in their countries oil discovery and Tullow was spot-on in using this to their advantage to raise 109.5 million Ghana Cedis ($72.3m) from the Ghanaian market. It is the ability of the listing company to know the true culture and sentiments of the country they want to operate in it and leverage on it.

• To entrench local content in ownership or market acceptability
Most big corporations that want to enter a new market or expand their operations can use cross listing strategy to establish a local content and increase acceptability of their presence. This is because of the enormous gains associated with being a locally trusted listed firm. Ghanaians who purchased Tullow, ETI, GSR and AGA etc now feel a sense of ownership. This position saves the cross-listed firms in the long run, as issues of strike actions and sabotages become minimal. It is no wonder Tullow Plc and Golden Star Resources which are both into exploration, have decided to list on the stock exchange in their new region of operation to avoid sabotages to a large.
To reduce their market risk
The financial challenges in Europe and America makes it difficult for businesses to sustain the prices of their stocks as prices fall at higher or alarming rates. With Africa emerging with an incredible higher rate of growth and high return on investments, firms like Tullow Plc see it as a fertile ground to raise and invest capital for a higher return.

• Competitiveness
All firms strive for utmost competitiveness in their industries. Competitiveness may come in different ways, but the stock exchange has given firms with global presence to entrench their global competiveness. Cross listing enables firms to gather enough capital, build greater brand equity with wide market reach and acceptability. Tullow Plc’s experience is typical of global brands trying to remain ever competitive irrespective of the new global economic and financial woes.

Performance of the Cross-Listed Firms
Tullow Plc has just listed on the Ghanaian stock exchange and it is doing fairly well by getting some good capital gains of about nine pesewa as at first week in November 2011 for its investors. It started trading on the GSE on 27 July 2011 at Ghc 31 per share. They recently declared an interim dividend on their stocks, which I believe is good for its investors. Even though this is very impressive, doubt still lingers as whether Tullow can continue declaring dividends, especially with the current reported fall in oil production in Ghana.
Impact on investors and company--- is it a mutually beneficial relationship?
The CFAO Case: was it purposely designed to raise money for their projects and exit the market?

CFAO got listed on more than one African stock exchange and obtained funds for the operations in the Sub Saharan African region. The company expanded and made huge profits but never paid dividend to their shareholders in Ghana. They delisted from all the African stock exchanges and are now a private company. There were little or no capital gains. Dividends were not declared.

“The Board of CFAO Ghana Limited tabled a special resolution at the company’s Annual General Meeting (AGM) of December 17, 2009 for de-listing from the GSE. The intended corporate action is subject to the policy of the CFAO group to de-list its subsidiaries from all stock exchanges including GSE. Shareholders at that AGM voted for the company to be delisted from the GSE. In line with the GSE de-listing rules, CFAO has made exit arrangements for all existing shareholders who wish to sell. The exit price is GH¢ 0.04, the share price on the day of the AGM”. (Source:http://www.ibrokerghana.com)

Judging from this release, CFAO virtually used the African investors as means to an end. Worst of their action was their decision to delist from the GSE and other stock exchanges in Africa. This action by most multinational companies to exploit local investors is depressing. The investment public must start questioning the motives behind the listing of some of these companies? Even though their presence brings employment opportunities, they actually take more than they give.

With such a precedent, Tullow Plc must feel pressured to set good examples for other multinationals that have interests in investing in Africa. Cross listing indeed must be mutually beneficial to both the investment public and issuing companies.
Tullow Ghana paid an interim dividend of 0.0968 Ghana pesewas per share to their shareholders. This result is uplifting as it deviates from the typical exploitative approach from CFAO. Over the years, ETI has also been rewarding to its shareholders with dividends it often declares though it’s meager. The stock has fared well in the market, except for recent stumbles in the stock’s prices. This is largely associated with the recent merger and acquisition drives adopted by ETI to leverage its position in the African market. Its long-term performance is positive and shareholders should consider acquiring more shares now.

Who is the principal gainer?
Most often, investors tend to gain when they buy shares of companies that are performing better on the stock exchange. This is because of the extra income associated with the capital gains of well performing stocks. On the other hand, shareholders of poor performing firms often make capital losses if they sell at the prevailing market. The situation even becomes worst if the company pays insignificant dividends. If this happens, the relationship is not mutually beneficial. The investors will lose. If the issuing company tries as much as possible to work well and make profits, pay good dividends and the stock performs well too on the exchange, the relationship then becomes mutually beneficial. This is essential in any investment contract.
As far as business is concerned, there would always be projects that must be executed with extra funds. After the project appraisal and the eventual conclusion of a positive net present value and an internal rate of return that is good enough to make the project feasible, funding is the next thing to source. If the issuing company (e.g. in a right issue) has lived up to expectation in the sight of investors and the stock price is good, all things being equal, they would be able to raise funds at a higher price to execute their projects in order to remain competitive. On the other hand when the shares are performing poorly on the market and little or no dividends are declared, shareholders may be aggrieved and would end up selling to their stocks which would further reduce the company’s share prices. Hence it is better for the issuing company to ensure the efficient running of the firm to guarantee maximum profits and good returns on investors’ capital. Companies such as Standard Chartered Bank, Cal Bank etc. have lived up to expectation on the GSE so their right issues were successful.

There have been many instances on the GSE where the relationship between investors and issuing companies were not a mutually beneficial one. Most companies take investors money and for one reason or the other, do not put the funds into prudent use. Such firms continue to make losses especially on long-term projects hence locking the investors’ capital in the poor performing stock. In this case, I would say the company is the principal gainer and the investor a principal looser.

There is also another category of companies listed whose performance are not necessarily bad but have been greedy enough to pay their investors peanut dividends. They virtually did nothing to stop the stock price from falling but their main target was to acquire more stakes in other companies to the detriment of their investors. Ecobank Transnational Incorporated is the chief in that category. They are closing in on a hundred percent stake in Oceanic Bank of Nigeria and have also taken over The Trust Bank Ghana. Their approach is not bad if the group makes higher profits and in the next financial year, and pays good dividends. Maybe, shareholders would change their mind and stop selling now, and by their holding on to the stock the price may go up.

Source: www.skafuiteye.blogspot.com.

South Africa's All-share index hits new record high

JOHANNESBURG - South African stocks closed at a new lifetime high on Wednesday, gaining more the 1 percent as positive earnings statements and upbeat economic data from China helped lift resources firms such as Assore.

Johannesburg Stock Exchange electronic board

Shares of Absa, the South African lender controlled by Barclays, ended up 0.3 percent at 149.20 having earlier declined on news its veteran deputy CEO would step down next year.

"There is a lot of positive trading statements being released in our market in the last few days," said Betzi Yang, trader at Legae Securities.

"There is risk appetite. People are looking for a bit of a return. With a low interest environment, the only place where they can seek a bit of return is the equity market."

The All-share index, closed at its highest level in its 17 year history, finishing up 1.03 percent at 334,139.52 and marking at least its seventh record close since the start of the year. The Top-40 added 1.1 percent to 30,518.66, its highest close since May 2008.

Banking group Absa, investment holding company Mvelaphanda, bathroomware retailer Italtile and information storage firm Metrofile were the latest companies to flag growth in profits.

Absa, which briefly lost ground in afternoon trade on news its deputy chief would be stepping down, said on Wednesday its full-year earnings likely rose by as much as 22 percent.

Base metal miner Assore topped the charts after jumping 7.5 percent to 245.19 rand, extending gains after announcing on Tuesday it expected to post half-year earnings nearly double those it reported a year ago.

Gold miners took a softer tone as risk appetite returned to markets. Second-placed producer Gold Fields lost 1.1 percent to 127.55 rand.

Technical analysis would caution that the valuations are overheating with South African stocks now trading at a price-to-earnings ratio of more than 13, putting them roughly on line with U.S. stocks, according to Thomson Reuters data.

"It is quite phenomenal, the run that we've had," said Nic Norman-Smith of Lentus Asset Management. "All you can do is buy the cheap stuff, avoid the expensive stuff and the crash will probably come when one least expects it."

Trade was relatively active, with 200 million shares changing hands on the boursee, according to preliminary exchange data and compared to last year's daily average of 256 million shares.

Source: Reuters