END OF A BLISTERING JOURNEY

EGUAREKHIDE LONGE tells the Aradel story on NASD

NASD is the Over The Counter (OTC) stock exchange licensed by the Nigerian Securities & Exchange Commission (SEC). It was licensed in 2012 to trade the shares of public unlisted companies.  Prior to its being licensed, and following from the epic global financial markets collapse in 2008/2009, several investors in companies that had undertaken private placement of shares on the Nigerian Capital Market and those that had also invested in Initial Public Offerings (IPOs) at the time, found themselves stranded in their inability to get title (share certificates) to their investments and worse still to identify an organized way of selling the shares of the companies they had subscribed to, if they needed to.

Some then resorted to bilateral means of trading these shares looking for counterparties personally or through capital market agents to secure opportunities to sell or buy these shares at prices that were mutually negotiated.

It was under these circumstances that the NASD PLC. was licensed in 2012 and it appropriately posited that it was a platform set out to create liquidity transparently.

An OTC market permits shareholders of companies to simply engage their stockbrokers to approach the stock exchange, adhere to the exchange’s admission requirements of companies to be traded on its platform, which is inclusive of nature of the business the company is engaged in, historical financial performance, the individuals behind the company and its management and other relevant details.

Having been through these requirements successfully, the shares of the company can trade on the OTC stock exchange for this shareholder (who brought in the initial shares for trading) and others who would subsequently come to trade their shares in the company in question.

The history informs that the initial shares for trading for Niger Delta Exploration And Production Company PLC. (NDEP) was 2,500, reluctantly submitted for trading on the NASD OTC stock exchange by a staff of the company that urgently sought liquidity but was persuaded by their spouse (or relative) not to bring the shares to the market for trading.

These shares were, however, admitted to the market on August 1, 2013 at a price of N350 per share (nominal value of N10 per share).

It bears adding here that Niger Delta Exploration and Production Company (NDEP) is an original indigenous downstream oil and gas company built from the scratch by Nigerian professionals in the oil and gas industry. After 11 years of being hosted on the NASD OTC stock exchange platform, with various peaks and troughs and peaks again the company at some point in time in 2024, closed on the market at a peak price of N9,867.38/share.  A truly dizzying trajectory from its initial admission days of N350.

Thus, in the 11-year period of review of Aradel PLC. it attained a dizzying trajectory of capital gains (excluding dividends and bonus shares issued) of 2,719% or a compound annual growth rate (CAGR) of 35.47%. 

Maybe this does not sound too dramatic. Then listen to this; on January 1, 2023, NDEP shares (now Aradel Holdings PLC.) opened at a price of N197.78.  During the year Aradel paid dividends (interim and final) of N200/share. Aradel opened trading on the market in 2024 at N1,089/share.  As indicated above, it reached a peak of N9,867.38/share on September 4, 2024.

The shares of Aradel have been re-denominated to N0.50 nominal value which means each share of Aradel has been split to 20 shares.  After the stock split (September 30, 2024) the price was split to N469.95/share.  On Wednesday, October 9, 2024 Aradel closed at a price of N641.06; another jump of 36% in less than a fortnight.

This is the potential of price discovery in the transparent market NASD OTC stock exchange has created, and this is readily available and easily accessible to all public companies.

OTC markets are often incubation platforms; not necessarily all the time, but a lot of the time.  OTC markets are the first point of contact for companies in their early to mid-life growth stage, looking to orient themselves to the discipline of financial markets.

Thus, at some point, it is traditional that such growth companies seek to interact with the broader market platforms and desire to project their enterprises on (in some cases) an international stage.

They then seek to move to firm listing markets where they opt to expand their value propositions to the next level of their growth phases.

Aradel PLC. has come to that point in its decision on NASD OTC stock exchange.  A truly natural process.  Thus, in the week ahead, Aradel will be migrating to the Nigerian Exchange Limited to list its 4,344,844,360 shares of N0.50 nominal value at the last closing price of trading on the NASD OTC stock exchange on Friday, October 11, 2024.

Aradel as at October 4, 2024, with a market capitalization of N2.968trn constituted 74% of NASD PLC’s total market capitalization.  Thus, it will be trite to mention that the departure of Aradel Holdings PLC. from the NASD OTC stock exchange will be severely impactful.

However, the DNA of NASD PLC. has internalized this model in its operations; Price Discovery against the backdrop of a Transparent Market to create liquidity for Growth Companies.

There are more and certainly will be more Aradels in the Nigerian economy. 

This is keenly realized by the Board and Management of NASD such that it has broadened the offerings with five major platforms namely:

One, the OTC stock exchange (trading public unlisted securities). Two, the NASD Enterprise Portal (NASDeP – the growth company platform). Three, commercial paper issuance on NASD. Four, the NASD Digital Securities Platform (N-DSP). Five, VentureRamp (The NASD donor crowdfunding platform).

Companies like Aradel have given NASD PLC. the opportunity to do a lot more on the Nigerian capital market.  With the capital market including only 17% of the GDP of Nigeria, there is a lot of creative work ahead for the board, management and all the stakeholders of NASD PLC.

NASD, with its OTC origins is highly strategically placed to contribute significantly to evolving the value that has been espoused by the current administration in Nigeria as growing the economy to a US$1trillion size within the next 10 years.

We live in exciting (even though challenging) times.  But the time-tested maxim of fortune favouring the bold is also engrained in the DNA of NASD.

We welcome all our current and prospective companies, investors and all stakeholders to the new vista of NASD.

 Longe is Managing Director of NASD PLC