Some capital market operators on Tuesday said that recent preference for special placements by companies when raising new funds was due to the market crash of 2008.
Special placement means the sale of a company’s shares to a small group of private investors instead of the general investing public.
They said that these companies were still not confident of recovery of the primary market segment of the nation’s bourse.
Mr Okechukwu Unegbu, a former President, Chartered Institute of Bankers of Nigeria (CIBN), said that some companies were afraid that the market would not react positively to any public offering.
Unegbu said that companies were resorting to special placements to address immediate financial needs due to fear of under-subscription and reliance on bank loans at higher interest rates.
He said that long process of public offerings also contributed to companies’ preference for special placements that could be concluded in a week.
According to him, investors who believe in the company’s aspirations and missions are already identified during special placements.
Unegbu, however, said that special placement could not be done without the approval of shareholders, the Securities and Exchange Commission and the Nigerian Stock Exchange.
He called for intensive marketing of new issues by both market operators and regulators for investors’ participation.
Mr David Adonri, the Chief Operating Officer, Lambeth Trust & Securities Ltd., said that issuers of securities were still not confident about the recovery of the primary market.
Adonri said that the 2008 market crash made some investors to shy away from the equities market.
NAN reports that Oando recently raised N30.7 billion through special placement for the acquisition of ConocoPhillips’ Nigerian assets, while Wema Bank raised N40 billion for recapitalisation.
Unity Bank also recently got the shareholders approval to raise over N38 billion through special placement or rights issue.
JNC/POE/TA