Capital Markets Authority chairman Kung’u Gatabaki. CMA extended the suspension of CMC's shares from trading for a further 85 days to protect the shares from being hit by several court cases arising from a division in the firm’s boardroom. Photo/File
The Capital Markets Authority (CMA) has extended the suspension of motor firm CMC’s shares from trading at the Nairobi Securities Exchange for a further 85 days.
The move has dashed the hopes of shareholders looking to unlock funds held in the counter.
CMA said it extended the suspension to protect the share from being hit by several court cases arising from a division in the firm’s boardroom.
“As the court cases were not consolidated we still have one or two that are yet to be resolved. So we are waiting for that to be concluded,” said CMA chairman Kung’u Gatabaki.
CMC chairman Joel Kibe said the extension would end sometime in October. “It has been extended for 85 days because of the cases in court. Nothing has been concluded,” he said. The initial suspension announced on September 16 last year ended on June 4 and the extension will have kept the motor firm out of the stock market for a year.
The shares were suspended because of boardroom wrangles and court proceedings on the proper constitution of the board.
CMA had argued that the trading ban was meant to sustain investor confidence in the capital markets and give CMC Holdings’ directors an opportunity to resolve the outstanding issues.
The suspension has been extended several times to allow CMA to conduct a full forensic report on the company’s transactions, the subject of suits and counter suits involving the directors.
The inactivity of the counter has denied CMC shareholders an opportunity to adjust their portfolios, besides missing out on potential capital gains.
Foreign investors – who actively trade their stock portfolios — have been the hardest hit by the freeze.
Stock prices at the NSE have risen by an average of 13.9 per cent over the first five months of this year.
At the time of the suspension, the company’s 582.7 million shares were trading at Sh13.5 each, putting its capitalisation at Sh7.6 billion.
CMA has, however, in the past held that suspending the company shares from trading was in the best interest of the investors, a position shared by Mr Kibe.
“For people to get value for what they invested, it is better to wait till the cases are concluded to ensure there are no uncertainties that may lead to dumping of the share,” said Mr Kibe.
Some minority shareholders have gone to court petitioning that the directors of the company be ordered to call a general meeting which the motor firm has not held for over an year.
In the two weeks to the suspension, the shares had appreciated from Sh12 per share to a high of Sh13.5, a level last seen in June 2010.
Trading in the two-week period was dominated by block trades amounting to three million shares, sparking fears of insider trading.
The company has received negative publicity after divisions in the boardroom spilled into the public gallery with two factions accusing each other of serious fraud.
CMA’s decision to suspend the shares was, however, criticised by South African audit firm Webber Wentzel, which the regulator had hired to look into the affairs of the motor dealer.
“In our considered opinion, the suspension of an issuer’s securities initiated by the CMA should only be done after a preliminary investigation of the circumstances which may demand the protection of investors,” read the report.
Webber auditors further said that before suspending any shares from trading at the stock market, the regulator should invite the company whose shares it intends to suspend to make a presentation explaining why such action should not be taken. CMA did not give CMC such an opportunity.
Earlier this year CMA suspended East African Portland Cement Company (EAPCC) shares from trading for a period of 60 days following an earlier ban imposed by NSE on December 27, 2011.
CMA said the suspension was designed to give EAPCC time to address outstanding corporate governance issues and boardroom wrangles while protecting the shareholders’ interests.
The ban was lifted on April 11 with the share currently trading at Sh60 up from the pre-suspension price of Sh54 per share.
