I will reinvest 100% of my dividends in right issues – Elumelu tells UBA shareholders

UBA shareholders have been urged to reinvest their dividends in the bank’s upcoming rights issue. The bank’s chairman, Tony Elumelu speaking during its Annual General Meeting noted that he would be investing 100% of the dividends he receives for FY 2023.

He said, “I’m advising shareholders, as you get your dividends, reinvest a significant part of it. My group and I, we would be investing 100% of the dividends we get.”

“If we don’t do so, we would be leaving food on the table for others who did not labour for it.”

Advertisement

For FY 2023, the bank paid a final dividend of N78.7 billion, representing N2.3 per ordinary share to its over 277,000 shareholders. Chairman, Tony Elumelu who is the largest individual shareholder of the bank, holds about 2.54 billion shares through direct and indirect holdings. He is also set to receive about N5.85 billion in dividends from the bank.

During the bank’s Annual General Meeting that held on May 24, 2024, the bank’s shareholders approved the proposed rights issue that will see the bank issue 10,800,578,634 new shares, thus increasing the bank’s share capital from N17.1 billion to N22.5 billion.

UBA will carry out rights issues in stages

Although the specific terms of the rights issue remain undisclosed, Elumelu revealed plans to execute the rights issue in multiple stages. He explained that these stages will coincide with the banks’ dividend payments, enabling existing shareholders to reinvest.

He noted to the shareholders, “One of the resolutions we are proposing is to have rights issues carried out in series. We are going to have the first one soon, we’ll have the second one [maybe] after we do half-year interim audit.”

“We’ll have another next year when we finish another General Meeting. The point is to give shareholders the opportunity to raise money from their own investment to reinvest.”

While the offer price of the rights issue is yet unknown, with UBA shares trading around the N19 as of May 24, 2024, it is presumable that the offer price will be around the N15 region. Based on a presumption that the newly created shares are fully issued at an offer price of N15 per share, the bank will raise N162 billion.

With a current minimum paid-up capital of N115.8 billion, UBA needs to raise up to N384.2 billion to meet the N500 billion minimum capital requirement for the international banking license. Hence, it is highly improbable that the first rights issue will be sufficient to raise the required capital.

This challenge does not seem to concern the UBA chief, who outlined the bank’s recapitalization strategy during the AGM. The plan includes a rights issue, followed by a private placement and a public offering.

He noted, “Recapitalization is not an issue at all. Three stages, rights, private placement, and public offering. Although, I highly doubt that it will get to the public offer.”