Rigmarole

An English word, meaning a long complicated process. 

About the firm

National Sports Lottery Limited was incorporated on 03 January 2000, and commenced operations in July 2001 

The company was granted in December 2001, exclusive licence to carry out the business of lottery in Nigeria.

On the 9th July 2011 the firm was converted to a Public Company National Sports Lottery Plc, and listed on the Nigerian Stock Exchange on 14th December 2011. 

On the 2nd December.2011 the Board of Directors through special resolution changed the name of the company from National Sports Lottery Plc to Secure Electronic Technology Plc

The principal activities of the company are Lottery & Gaming Products

Moves in the works

Yesterday after trading hours, the firm released resolutions taken by its board of directors

The company is considering share reconstruction and recapitalization.

Reconstruction means shrinking the total number of shares. 

The restructuring shall result in the cancellation of 4,223,655,000 shares and the portion of the share capital cancelled, being valued at N2,111,827,500.00 be transferred to a “special reconstruction reserve”.

every 4 (four) shares of SET Plc currently held by a shareholder shall be converted to 1 (one) share and shareholdings that result in fractional shares post-reconstruction shall be rounded up to the nearest whole number.”

It will be raising capital and is considering paying a dividend. 

“that the directors be authorized to issue ordinary shares of 50 kobo each by way of Private placement in such proportion, price, or time of offering as may be deemed appropriate, subject to the receipt of all regulatory approvals.”

“That subject to all regulatory approvals of the reconstruction and recapitalization, the directors be authorized to declare an interim dividend payable to all shareholders of SET Plc from extraordinary Income reserved from the recapitalization in proportion to their shareholding as defined by the definitive Agreement.”

Why the rigmarole? 

Why take one step forward and two steps back? It would have made more sense for the company to pursue a capital raise, and leave out reconstruction.

Cons and Pros

The downside of this proposed move is there will be fewer shares trading. In the last 5 trading days, its done barely 2 million shares daily.  

Fewer shares available makes it less likely that investors would be willing to buy.

Liquidity is a key factor when buying a stock. It means how easy can one enter or exit a stock.

The upside is in the short term will trade at a much higher level. The stock will be adjusted to account for the cancelled shares.

Eventually, it will settle at where the public thinks it should be. Based on earnings and revenue growth.

Expenses are a bigger issue

SET badly needs to bring down its expenses. Unaudited FY 2024 results show the firm made N283 million in net income, and N366 million in admin expenses. It ended the year with a loss after tax of N118 million.