Domestic investors to the recently concluded GTBank GDR are to contact the respective underwriters through which their investments were made for collection of surplus monies due.
This development arose following the price determination which has brought down the price of the GDR as a result all domestic subscriptions were adjusted to reflect the offer price of US$11.20, whilst taking into consideration the subscription multiples of a minimum of 50GDRs. A domestic investor that subscribed for 500GDRs would initially have paid US$6,375 based on the Reference Price.
However, following the adjustment to reflect the official price of US$11.20 per GDR, the investor would be allotted a total of 550GDRs, while US$215 will be returned to same as surplus monies.
Explaining the reason behind the refund the bank is making to domestic investor it said, “Given the differences that exists between the Nigerian and international equity issuance process, one of which is the pricing of primary securities, the bank adopted an innovative and unique offering process, with a view to ensuring that such differences are minimised to a large extent in order not to frustrate the transaction and completion time line, while achieving the above mentioned objectives.
“In a typical primary equity offering in Nigeria, a “Fixed Price” approach is often adopted, i.e. investors are advised of a fixed price at which the primary offering will be made on the day an offer opens up till the closing date. However, in international capital markets, a “Book Building” process is often adopted for the marketing and pricing of primary equity offerings. Book Building is basically a capital issuance process which aids price and demand discovery. The Offer price is then determined after the bid closing date.
“Consequently, the underwriters of the domestic tranche adopted a Reference Price of US$12.75 per GDR for the duration of the domestic tranche as a guide for domestic investors, with the caveat that the offer price to be determined on July 20 may close at below or above the Reference Price, given the international market practices. On July 20, 2007, the offer price was fixed at US$11.20 per GDR.”
In July 2007, GTBank became the first Nigerian and African bank to issue a full listed GDR offering on the London Stock Exchange.
The transaction comprised a 2-tranche structure of a simultaneous US$250m domestic GDR offering and a US$500m international offering. The GDRs issued are represented by the underlying ordinary shares of the bank with an exchange ratio of 1GDR to 50 ordinary shares. While the domestic GDR offering is no different from the international GDR offering, this transaction structure was adopted as a means of ensuring that domestic investors were provided with the opportunity of participating in this historic offering.
Without a doubt, the recent GTBank GDR issuance in the international financial markets recorded an unprecedented milestone in the domestic capital markets and would provide the economy with several multiplier benefits.
The growing appetite for quality equity offerings from the international investing community is also viewed as a positive signal of the strong underlying prospects of the Nigerian economy in the short to medium-term. The GTBank GDR currently trades on the London Stock Exchange under the ticker symbol “GRTB”. It is understood that the bank will be issuing a secondary market trading guide for the GDRs to domestic investors in the very near future.