Experts differ on unusual purchase of Zenith Bank shares

  • Financial instituion silent on N6.88 billion sale

Insinuations that a possible entry of a new investor, big enough to acquire a seat on the board of Zenith Bank Plc, given the quantum of transactions executed on its shares on Wednesday, were dispelled yesterday, as experts explained that the undervalued nature of the stock propelled the volume spike.

At the close of trading on Wednesday, transactions in the shares of Zenith Bank topped the activity chart with 288.27 million shares valued at N6.88 billion. This significantly triggered the total volume of shares traded as investors exchanged 450.14 million shares worth N9.39 billion in 2,858 deals.The amount of shares exchanged represent an increase of 200.79 per cent over a turnover of 149.65 million units valued at N2.79 billion transacted in 3,063 deals on Tuesday.

Yesterday, the bank was not on the list of the top five traded stocks, as the volume of shares traded dropped to 2,156,475 million units worth N52 million in 160 deals.

A stock-broking firm familiar with the Wednesday transaction told media that such a big-ticket transaction in Zenith Bank shares is a strong indication that a strong contender interested in a seat on the bank’s board. He said: “There was a large volume on Zenith transaction on Wednesday. There are speculations that someone wants to take a seat on the board of Zenith Bank, and that is why such huge transaction was executed.”
Part of the speculation is that the buyer in wanting to become a board member, may be trying to whittle the equity of the existing majority stakeholders.

However, Zenith Bank when contacted, claims it is unaware of the huge transaction, promising to get back to media source on the matter, but never did as at the time of filing this report But the Managing Director, Highcap Securities, David Adonri, in a telephone interview, dismissed the speculation, noting that quantum of shares alone cannot qualify an individual to become a board member in the bank.He said: “Zenith Securities has its own shares. The firm can buy or sell its own shares, and they have big clients both domestic and foreign investors. Zenith has almost 30 billion shares and if someone buys 288 million shares; it is just a tip of the iceberg.

“It is not so significant because for you to be on the board of such a bank, you have to buy up to five per cent which is up to three billion shares, the transaction we are talking about is not up to one per cent. You have to buy up to five per cent threshold before you can request to become a director.”

Agreeing, the Founder, Independent Shareholders Association, Sir Sunny Nwosu, explained that the volume of shares held is not a prequalification for board membership of a listed firm, noting that one’s profile and track record are the major considerations for such membership.

“It does not require any number of shares to become a board member. The huge transactions may be a configuration of shares, which occur when someone is doing a nominal transfer, and it may be one of the directors that was selling to another and brought the transaction on the floor of the Exchange for formality sake. It may also be that someone is consolidating his portfolio. By law, this kind of transaction cannot qualify someone to be a board member,” he added.

Also commenting, the President, Progressive Shareholders Association, Boniface Okezie, noted that a number of listed firms are experience an uptick in their shares, as investors are taking position ahead of dividend payment. “Before you become a board member, the directors must go through your profile and track record; it is not by your holding position. Investors are just taking position based on the fallout of the third quarter with optimism that the dividend will be higher,” he explained.

The Chief Executive Officer, Investdata Consulting Limited, Ambrose Omodion, strongly believes that the volume spike signalled the entry of institutional investors as portfolio reshuffling is ongoing ahead of December rally and 2018 full year report.

He said: “It has been noted that the stock is selling below its book value, leading the sector as the stock with the highest dividend yield. Zenith Bank is currently trading above its 100-Day Moving Average, and 45 per cent below its 52 week high.“Zenith Bank was undervalued with the highest dividend yield in the banking sector. It is selling below book value so there is no risk investing in the stock, the margin of safety for the stock is very high while the risk is minimal.”

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