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When Eunice Okeke bought shares of MTech Plc in July, 2009,
through her stockbroker, she thought she was making a worthy investment. The
shares had been listed by introduction on the daily official list of the
Nigerian Stock Exchange (NSE), under the information and communication
technology subsector, at N2.50 a few weeks earlier. At that point, investors
who had participated in its private placement barely a year before at the price
of N1.50, had already reaped a handsome 66.7 percent returns on their
investment.

MTech Communications had, in May 2008, raised N3.5 billion by
offering to prospective investors 2,333,333,334 ordinary shares of N1.00 each
at N1.50 per share. The offer was fully subscribed, proceeds of which was to
expand its business and enhance returns to its shareholders.

It was the hope of such returns that prompted Mrs Okeke to
invest in the firm, which was the first Value Added Services (VAS) company to
be listed on the exchange. On June 9, 2009, a total of 4,966,666,668 ordinary
shares of 50 kobo each were offered at N2.50 kobo per share, bringing its
market capitalisation to N12.42 billion. Chika Nwobi, cofounder and managing
director of the company, said of the listing, “we decided to list by
introduction so that those who have invested in the business can have an option
of liquidity.”

Unfortunately, the listing was done at a time when the stock
market was in turmoil due to the global financial meltdown, which had began to
take its toll on the Nigerian economy. By November 23, the share price had
slipped to 91 kobo, a depreciation of over 63 percent. Initial investors were
already making profit.

False declaration

However, any further hope that the shares would appreciate
according to the dynamics of market forces were dashed finally when, on
December 14, the NSE council suspended trading on the shares in order to
protect the investing public. In a letter dated December 11, 2009, and signed
by the former director general of the stock exchange, Ndi Okereke-Onyiuke, the
council accused some parties in the offer of tampering with the register of
members, overstating of the share capital of the company, as well as false
declaration of compliance filed with the exchange prior to listing of the company.

The letter, which was copied to the CBN governor, managing
directors of the Central Securities Clearing System, Platinum Capital,
Greenwich Trust, and MTech, stated, “We are aware that the Securities and
Exchange Commission and the Central Bank of Nigeria are considering matters
arising from the dispute between MTech Communications Plc and members of the
Bank PHB Group.”

The letter was in reaction to an earlier communication by MTech
to the exchange to the effect that these discrepancies had occurred. “Upon the
conclusion of action by the commission on the matter, the exchange proposes a
comprehensive review of the listing status of the company with a view to
delisting it from the official list.”

Sola Oni, spokesperson of the NSE, said MTech had some challenges
with Bank PHB over its private placement.

“Upon listing of the company, there were some discrepancies in
the register of shareholders and the council decided that until they make
clarifications, the shares may be placed on full suspension,” he said, saying
although the exchange did not give the parties a deadline to respond, it did
not also foreclose further investigation as the issues involved borders on
criminal intent. “We should get to the bridge before we cross it. For now, we
have not received any response from them,” he said.

Indebtedness

However, NEXT investigation revealed that directors of Mtech
were indebted to Bank PHB, through its subsidiary, PHB Asset Management Company
Limited. A source in the company, who spoke off record, said the directors of
the bank who were involved in the transactions had been relieved of their
employment, following the intervention by the Central Bank of Nigeria in the
troubled bank last year. Bank PHB is owed a total of N170.1 billion by 149
individuals and firms.

According to the source, at the conclusion of MTech’s private
placement in 2008, which was fully subscribed, Bank PHB failed to remit the
full N3.5 billion. The bank instead opted to deduct the amount owed it by the
directors and remit the balance. MTech is refusing to accept this arrangement,
as it was outside the terms of the placement agreement.

Kayode Falowo, managing director of Greenwich Trust, which acted
as stockbroking to the listing, said his firm was not involved in the
discrepancies mentioned. “I have repeatedly said that we are not involved with
these accusations. We wish to reemphasis that Greenwich is not involved with
the falsification of figures or tampering with shareholders register,” he said
in a text message.

MTech reported

Efforts to speak with Mr Nwobi was unsuccessful, as he refused
to respond to calls to his mobile. A source close to the company, however, said
it was the company that discovered the discrepancy and decided to notify the
regulators. In addition, the MTech had taken the PHB Group to court alleging
that its register of shareholders had been tampered with. The company insisted
that it reported the case to SEC and CBN and sought protection for its
shareholders by requesting the suspension of trading in its shares from the
NSE, pending resolution of the matter.

“MTECH’s directors have not been involved in (1) falsification
of figures (2) tampering with shareholders register. The directors and MTECH
Plc do have a dispute with BankPHB, PHB Asset Management, and PHB Capital and
Trust over irregularities in the handling of MTECH’s private placement and
listing,” a statement from MTech said. “The matter is before the Federal High
Court so no further comment can be made on it.”

An insider to the transactions, however, said MTech was being
economical with the truth. He said the directors, who were indebted to Bank
PHB, were looking for ways not to pay back their loans.

“We gave some individuals loans. They have not paid. If they say
we tampered with their register of members, there are documents, signed off by
MTech, which is still available. We have the list of people that subscribed to
the private placement. So when the time comes, there are documents to show the
true position of things,” she said.

However, while this corporate battle lingers, hapless shareholders of the
company are left in the lurch. They cannot get value for their investment for
all they are worth. When the shares are eventually delisted by the NSE, the
shareholders would have recorded a loss of about half the value of their
initial investment as at the time the shares were listed.