The Sterling Bank Saga: My Reaction
I have waited for Sterling bank to do the right thing after their recent reconstruction in which a lot of investors lost all the value they had in the company to no avail. Investors lost both due to the bearish trend in the market and to the fast one that Sterling bank played on them. The bank came up with a credible explanation to what happened and succeeded in exonerating themselves but in doing what they did, I have lost all confidence in their desire for corporate governance in shareholder protection.
Sterling bank may have done everything right legally but have they fulfilled their fundamental obligations to their shareholders? NO! We may go to court over this case but who will win? Of course, the behemoth called Sterling bank will win because according the twisted rule of law in Nigeria, it is the body that can provide the highest paid SAN that will win any case.
Let us go back to the fundamental rules that guide all financial markets:
1. the integrity of the capital market should be protected
2. the wealth of the investor should be protected
These fundamental principles, listed in order of priority guide all the capital markets in the world. If anyone of them is broken, the equity market is no longer equitable. To drive home this point, imagine what would happen to the capital markets if all investors stop investing out of lack of trust.
Sterling bank has systematically broken these principles under the protection of Company and Allied Matters Acts (CAMA), which is subordinate to the fundamental principles while CBN, SEC and NSE looked on. I don’t blame Sterling bank, they only used the law to their own advantage at the detriment of the common investor.
Let us go back again to the root of the matter. WHY should NAL/Sterling bank bring poorly valued shares to the market knowing fully well the long term consequences? WHY should SEC allow shares that have different values sold at the same price be listed on the NSE without proper adjustments? WHERE was CBN when improperly matched banks were uniformly aligning themselves and giving us the wrong picture? WHO suffered the consequences? WHO gained? WHO was negligent? It is the poor investors like us whose networth is not enough to buy the shoelaces of a Sterling bank Senior Advocate of Nigeria (SAN) that bought Sterling bank shares at N8.00 that was actually worth N4.00 (by my retrospective calculations) that suffered. It is the directors whose sneeze can build a brand new house in VGC that offloaded N4.00 worth of shares to us at N8.00, knowing fully well the true value of the shares, who gained. It was the umpires, CBN, SEC and NSE who are supposed to protect the integrity of the market and investor confidence, who were negligent.
Telling me to go and read their merger documents before investing is a bunch of crap. All I need to do is look at their profitability and liquidity indices before making my decision to buy from the floor. This is based on the premise that we deal with capital markets because we believe that all equities are equitable at 50K per share. I reiterate that NSE should not have allowed shares of a company that are worth 20K, 30K and 50K be listed and sold at the same price on the floor. This disorganization should have been sorted out before listing at all, and if listed should have been on full suspension before they traded. I am quite sure that the auditing process would not have taken up to three years. After all, Sterling bank had been on suspension for over a year out of the three years of trading, right? As far as I am concerned Sterling bank has ripped us off.
NSE, SEC and CBN were negligent in their duties, allowing Sterling bank to run rings around them. As for Sterling bank, their corporate image and stock is worth less than a used toilet paper to me.