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MTN Group sells Nigerian subsidiary stake at a loss, triggers underperformance sentiment

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MTNN 9-month profit falls by 3.3% to N144bn

MTN Group has announced a plan to reduce its stake in MTN Nigeria, a move that could be seen as the majority shareholder envisaging the stock may underperform in future.

In a statement released to the Nigerian Exchange Group and investing public, MTN Group will sell off 575 million shares held in MTN Nigeria at a reduced price of N169 per share to retail investors.

MTN Group selling stake at a loss?

Ripples Nigeria understands that the 575 million shares is part of the 15.48 billion shares MTN International (Mauritius) Limited held in the Nigerian subsidiary on behalf of MTN Group.

The parent company, based in South Africa, holds 76.08 percent stake in MTN Nigeria worth N2.94 billion, but the value will drop to  N2.83 billion upon the impending transaction Ripples Nigeria analysis shows.

Based on the current market price, MTN Group will be selling at a loss considering the 575 million shares will be sold at N169 per share, bringing the worth to N97.17 billion, against the N109.25 billion it could have earned if the stocks are sold at the current rate of N190.

Other key things to note from the sell off

According to the filing, MTN Group will sell the stocks at a future date between 8:00 am on Wednesday, December 1, 2021, and close at 5:00 pm on December 14, 2021, at the fixed price regardless of the performance of the share between now and the deadline.

Read also: MTN to sell off assets as telco intensifies market exit, amid subscriber loss in Nigeria

MTN Group will also issue bonus shares to retail investors who are expected to put in for a minimum subscription of 20 shares and in multiples of 20 shares after, which will attract one bonus share for every 20 shares bought, but subject to maximum bonus shares of 250 per investor.

Note that sell off by a substantial shareholder or insider could send a signal that the company’s stock is heading for a downward path, which results to loss of money or shareholders investment value.

With MTN Group selling a portion of its stake, it could be viewed as the telco reducing its exposure to a possible downturn in the market, since share purchase by an insider or substantial shareholder means positive price movement ahead.

Such transaction as the latest move by MTN Group could push other minority investors to rush for the exit door since the stock of MTN Nigeria has been trading flat at N190 per share since it hit the peak of N201 on November 10, its highest level this year.

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