The attention of NGX Regulation Limited (NGX Reg- Co) has been drawn to a misconception regarding the role of NGX RegCo in determining the listing price of prospective companies (Issuers) seeking to list on Nigerian Exchange Limited (NGX). Recently, several commentators have raised concerns over the listing of some Issuers’ equity securities at prices considered too high.
To these investors, NGX RegCo’s due diligence during the listing application review process should have uncovered that the listing prices of such securities were unreasonably high and intervened accordingly. NGX RegCo, in a statement, said it wishes to provide clarifications to the public on its function with respect to listing applications, particularly as it relates to the determination of an Issuer’s listing price.
“An Issuer seeking to list its equity securities on NGX (where the equity securities of the Issuer have not already been listed on NGX) is required to indicate the proposed listing price of the equity securities in its application to list. The Issuer is also required to submit a pricing memorandum, which is a document that details methodologies and assumptions adopted by the Issuer and its advisers in arriving at the proposed listing price, among other documents. “In reviewing the listing application, NGX Reg- Co does not intervene in the proposed listing price, as obtained in some other jurisdictions. However, NGX RegCo reviews the pricing memorandum to understand the basis of arriving at the listing price and to evaluate whether the pricing methodologies and assumptions are based on generally accepted valuation principles. It is the responsibility of the Issuer and its advisers to determine the listing price, using a generally accepted pricing methodology.