By John-Allan Madowo in Abuja
Transcorp Power'srecent listing on the Nigerian Exchange (NGX) has unleashed a wave of controversy, spotlighting possible governance concerns and causing investor unrest.
Central to this unfolding drama is Tony Elumelu, a luminary in Nigeria's corporate firmament, whose strategic manoeuvres have come under intense scrutiny by some investors.Some critics allege that Elumelu's actions could potentially marginalise minority shareholders to the benefit of larger stakeholders in their expense.
The roots of the controversy are in Elumelu's broader business strategies, notably his decision to list Transcorp Power as an independent entity on the NGX. This move, ostensibly aimed at securing a dominant position for Transcorp Power within the Nigerian energy sector, has instead engendered a heated debate over the equitable distribution of equity and the transparency of corporate practices in Nigeria. Observers point to the historical precedent of United Capital and African Prudential's spin-offs fromElumelu's holding UBA Plc as examples of the company’s strategies that have, in their view, systematically side-lined minority shareholders.
In this situation, opinions on Elumelu's reasons for listing Transcorp Power vary widely.
On the one hand, some think he wants to follow in the footsteps of Nigerian billionaire businessman and activist investor Femi Otedola, an Carl Icahn-like figure whose company, Geregu Power Plc,has become a leader in Nigeria's energy market. They see this as Elumelu's attempt to boost Transcorp Power to similar success. On the other hand, some investors believe that Elumelu is mainly looking to increase the paper valuation of his own wealth and land a spot on the Forbes billionaires list. This view suggests the listing might be more about Elumelu's personal ambition than about benefiting the company or its shareholders, say critics.
However, Elumelu's Heirs Oil and Gas faces significant challenges, losing a reported NGN1.8bn daily ($4.3mn) to oil theft after acquiring a 45% stake in the OML 17 onshore oilfield. These losses and other issues could impact his net worth valuation and purported ambitions to be included in the Forbes rich list. But local media shy away from reporting about problematic issues, which has been blamed on UBA's stronghold on the advertising market in Africa, which discourages media from publishing anything potentially damaging to his reputation, according to critics.
The strategy behind the listing has attracted considerable criticism, particularly regarding the paltry number of shares made available for public trading – a mere 0.05% of the total. The tiny free float opens up the potential for market manipulation that could artificially balloon the market valuation of the company on paper. Moreover, the shares were released during a pre-close session that restricts broader market participation by traders, thereby casting a shadow over the listing's transparency and fairness.
The small free float nevertheless led to a $1.1bn valuation following the float, which was touted by company executives as a strategic initiative to unlock shareholder value. However, minority investors complain that there was no clear share allocation strategy for minority shareholders during the book building process that could have led to unequitable allocations of shares during the listing.
The Transcorp Power listing was organised by United Capital, which acted as lead financial advisor and lead broker. United Capital, controlled by Elumelu's family office Heirs Holdings and has been a preferred choice for other financial transactions involving Elumelu’s assets. In previous bond issuances by the group, United Capital also served in a pivotal capacity in the placements.
Transcorp Power plays a significant role in Nigeria's electricity supply chain, making the company’s corporate governance a national issue and its acquisitions of the Ughelli and Afam power plants have been closely scrutinised. Nigerian regulators and the broader market community are still grappling with the need for more robust governance frameworks to ensure transparency, fairness and the protection of minority shareholder interests in the local capital market.
A veteran investment broker in Africa, who preferred to remain anonymous for fear of potential backlash, said: “The situation with Transcorp Power not only highlights the challenges in the Nigerian energy sector but also raises significant questions about the broader corporate governance landscape in Nigeria. It's imperative that we see more transparent and equitable practices in the market to maintain investor confidence and ensure the sustainable growth of our economy. The limited release of shares to the public raises serious questions about the transparency and fairness of this listing. If Mr. Elumelu's motivation behind the Transcorp Power listing is predominantly personal gain, it undermines the very principles of corporate governance and equity. Such actions not only jeopardise investor trust but also set a dangerous precedent for corporate practices in Nigeria.”
The listing has ignited a broader debate about corporate governance practices in Nigeria, with implications that extend far beyond the immediate stakeholders in the Transcorp Power listing. Pundits hope the controversy will shake up the market and encourage a move towards better corporate governance standards for Nigerian commerce in general.
