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Investors: ADB’s IPO cancellation bizarre

Some investors have expressed surprise at the decision by the Agricultural Development Bank (ADB) to reject applications for its shares under banks’ initial public offer (IPO), citing the government’s invisible hands in the cancellation.

The management of ADB last week communicated its decision to reject applications for its shares after some investors offered to purchase shares at GH¢2.00 each instead of the GH¢2.65 per share under its IPO.

This has compelled the Securities and Exchange Commission (SEC) to direct IC Securities, the transaction advisors, to ensure that all monies received in respect of the offer are returned to applicants.

A statement issued in Accra by the SEC and signed by its Director-General, Dr Adu Anane Antwi, said the order was in line with provisions under paragraph 1.7 of the ADB prospectus and in accordance with section 284 of the Companies Act, 1963 (Act 179).

But insiders who applied for the ADB shares said they were surprised at the turn of events since the Prospectus for the Offer made provisions for investors to conduct their own due diligence and make bids they deemed was appropriate to compensate for a unit of the shares.

ADB profitability versus share price

At the initial flotation, the prospectus projected ADB to record a profit of GH¢50 million, based on which the share was priced at GH¢2.65. However, towards the end of the offer, the transaction advisors issued a release which projected ADB to record a loss (not profit) of GH¢40 million.

In the final analysis, however, ADB posted a loss of GH¢78.97 million, thus compelling investors who did due diligence to offer GH¢2.00 per share as a fair representation of the value of the ADB share.

The Daily Graphic has gathered that apart from two institutional investors, the Social Security and National Insurance Trust (SSNIT) and the Ghana Cocoa Board (COCOBOD) which offered to buy the shares of ADB at GH¢2.65, all other applicants quoted GH¢2.00.

According to the SEC, ADB received a total subscription of GH¢437,934,810.00 at the close of the offer on March 25, 2016, out of which offers made at GH¢2.00 per share amounted to GH¢435,085,151.00.

Rejecting the offer

Rejecting the GH¢2.00 offer, therefore, meant that the bank would be unable to satisfy the minimum subscription of GH¢100 million set in the prospectus to enable it to process the list on the Ghana Stock Exchange (GSE).
Based on that, the SEC ordered the transaction advisors to refund monies to the investors as per the Securities law.

The sources, however, told the paper that the lower offer still represented an oversubscription and went past the GH¢100 million minimum capital that the bank was expected to raise through the IPO, hence they found the decision to reject and cancel the IPO rather bizarre.

The Daily Graphic has, however, learnt that transactions advisors are preparing to engage the bank and the government before they go ahead to refund investors monies, in compliance with the directive of the securities industry regulator.
Meanwhile, the SEC said the management of ADB had communicated its intention to it to re-launch the offer.

According to the Director-General of the SEC, that would require the submission of a new offer document to the SEC for approval.

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