Investors Accuse Stanbic-IBTC, Chapel Hill Of Fraud In Starcom Private Placement

A row is in the brew in the community of investors, especially, among those that bought into the private placement of Starcomms Plc last year. At the centre of the uproar are two issuing houses to the shares of Starcomms Plc, Chapel Hill Denham and Stanbic-IBTC.

Mr. Adebayo, one of the investors that bought the private placement of Starcomms Plc observed in a fit of frustration that it is very evident that “Starcomms Plc Private Placement” has become the epitome of “fraud.”

“The Placement of 4.95 billion shares, which opened and closed on 3rd June 2008 at a price of N13:00 appeared so attractive to investors at that time as it was over-subscribed,” Adebayo recalled.

Apparently angered at the down-turn of the investment, Adebayo explained that: “The projection in the placement memorandum says that the company will declare a loss of N197 million at the end of 2008 financial year end. Unfortunately, the company declared a loss after tax of N1.014 billion in the second quarter and N2.149 billion in the just released third quarter result.”

Starcomms Plc was listed at N13.56 on Monday, 14th July, 2008, between then and now, the price of the share had slid to a low of N3.86.

“In fact, the price dropped consistently to N7.46 less than two months after listing,” Adebayo opined. “The question to ask now is during that period, who was selling since most investors that bought shares during the private placement still had certificates that were unverified. Could it have been the original owners dumping on new investors? Can someone please explain why the variance between the forecast and the actual result declared is so staggering? Was money being laundered? What happened to the proceeds of the placement? How much expansion has the company embarked upon since the placement?” Adebayo queried.

Another investor frontally accused the two issuing houses to Starcomms placement, StanbicIBTC and Chapel Hill Denham, a capital market operator that was recently selected as one of the market makers for the Nigerian Stock Exchange. Concerned investors argued that the two issuing houses lent their brand names to be exploited by Starcomms to defraud them.

“The placement was actually successful because Starcomms Plc leveraged on the good name and credibility of Stanbic IBTC Bank Plc and Chapel Hill Advisory Partners. But looking at the whole situation closely, it seems there is more to what we can see. It’s so obvious that Starcomms’ goal from the word go was to defraud the public,” an investor submitted.

“Another question begging for an answer is the role of the two issuing houses in this? Or did Lababidi/Starcomms Plc (Chief Maan Labadidi is the Chairman of the board of Starcomms Plc) act alone?” Adebayo asked. While trying to establish a connection and possible connivance to defraud investors, Adebayo questioned the appointment of Mr. Wale Edun, Chairman of the board of Chapel Hill as a non-Executive Director of Starcommc Plc.

“I want to question the connection between the sudden appointment of the Chairman of Chapel Hill Advisory (Mr. Wale Edun) as a non-Executive Director of Starcomms Plc? Have the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) been asking any questions? How have the professional parties to the placement been able to comply with post-listing compliance requirements? Why are the regulatory bodies keeping mute about this great injustice to investors?” Adebayo queried.

Giving further revelations of the intentions of the Chairman of Starcomms to approach the capital market to raise funds for another company that he has interest in, Adebayo said:

“We hear that the same Lababidi now wants to bring another company to the market (Supreme Flourmill Ltd); this only shows that this individual thinks we are all fools in Nigeria. Please beware of this offer,” Adebayo warned other investors.

Commenting on what investment in Starcomms had turned to, Mr. Ajisafe, another investor opined:

“This is a serious matter and I have decided to sensitise everyone on my list thereto. This is, no doubt, a huge fraud and I am of the opinion that the SEC and NSE should stand indicted in the whole affair! Also, the two issuing houses, I believe, have an explanation to make to unsuspecting investors because investors relied on the strength of their analyses to buy the Starcomms offer. This is shameful and I submit that the matter be investigated and all those found to be culpable be treated in line with the IST sanctions. They are no better than Madoff! Moreover, investors should be wary of issues by the concerned issuing houses (Chapel Hill and StanbicIBTC),” Ajisafe submitted.

Another investor said of the suspicion of collaboration to rip investors on the Starcomms’ private placement.

“It is amazing what our corporate gurus are doing to stay on top of the ladder, gone were the days when our industrialists gave to charity, now our so called industrialists have board meetings and make strategies on how to use their companies to defraud the masses. We are all talking about Madoff but oblivious to the presence of individuals perpetrating worse atrocities right here in Nigeria. We all know that hedge funds are not regulated, and that probably explains why they are able to get away with all they do. How do we justify or indeed explain the flagrant act of fraud against the public in a regulated market? Starcomms came into the market to raise capital, many unsuspecting investors rushed at it, expecting high returns on their investments; it is a pity that it is now a different story entirely. It is obvious that being a politician is not the only way to “rush” up the ladder of wealth; the capital market is an untapped goldmine to fraudulently enrich people who are influential in the business and financial sectors, thanks to our Indian “friend.”

In a statement made available to Fortune&Class Weekly by officials of Chapel Hill Denham, one of the issuing houses to the Starcomms private placement, the issuing house noted that “several investors never read the PPM or all the documentation made available at the time of the placement and many bought through brokers and friends, who were among those invited and never actually saw any documentation and never understood that it was sold as a growth stock, which would make a loss in 2008 (albeit, a smaller loss than we expect to see for 2008), a profit in 2009 and pay dividend in 2010.”

Chapel Hill Denham further asserted in the statement that, “What essentially has happened is that a completely unforeseen heavy subsidy led competition by Visafone and Telkom Multilinks, has meant Starcomms spending about N2 billion more on subsidies than was projected. Essentially, a line with a handset costs about $45 each and it was being sold at N10 each. Starcomms board and management felt that it did not yet have the scale from a subscriber perspective at 1.2million gross subscribers, to stay out of this battle for subscribers.”

The statement further explained that Starcomms had over the years to over 2.5 million gross subscribers, higher than the business plan but at a hefty cost.

“This subscriber’s base will be beneficial this year and beyond, as you can imagine that over two million subscribers spending about $15 per month should generate revenue of about $350 million in 2009. This is not a business in distress by any circumstances,” the Chapel Hill Denham statement observed.

The management of Chapel Hill Denham also explained that contrary to the rumour being spread, the founders, the Lababidis actually increased their holding during the private placement, spending about $17million directly and indirectly, through their other businesses.

“The only shareholders who sold during the placement were the two private equity firms, Actis and ECP, for whom the funds they invested from had come to the end of their life and had to return the money to their investors and partners. All of these were disclosed to investors in the private placement,” the statement noted.

No official of Stanbic-IBTC was available for comment.

Eight business technology trends to watch

Eight emerging trends are transforming many markets and businesses. Executives should learn to shape the outcome rather than just react to it.

JAMES MANYIKA IS A DIRECTOR AND KARA SPRAGUE IS A CONSULTANT IN MCKINSEY’S SAN FRANCISCO OFFICE; ROGER ROBERTS IS A PRINCIPAL IN THE SILICON VALLEY OFFICE.

Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business. Through our work and research, we have identified eight technology-enabled trends that will help shape businesses and the economy in coming years. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

Managing relationships

1. Distributing cocreation. The Internet and related technologies give companies radical new ways to harvest the talents of innovators working outside corporate boundaries. Today, in the high-technology, consumer product, and automotive sectors, among others, companies routinely involve customers, suppliers, small specialist businesses, and independent contractors in the creation of new products. Outsiders offer insights that help shape product development, but companies typically control the innovation process. Technology now allows companies to delegate substantial control to outsiders-cocreationin essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

Information goods such as software and editorial content are ripe for this kind of decentralized innovation; the Linux operating system, for example, was developed over the Internet by a network of specialist.

But companies can also create physical goods in this way. Loncin, a leading Chinese motorcycle manufacturer, sets broad specifications for products and then lets its suppliers work with one another to design the components, make sure everything fits together, and reduce costs. In the past, Loncin didn’t make extensive use of information technology to manage the supplier communityan approach reflecting business realities in China and in this specific industrial market. But recent advances in open-standards-based computing (for example, computer-aided-design programs that work well with other kinds of software) are making it easier to cocreate physical goods for more complex value chains in competitive markets.

If this approach to innovation becomes broadly accepted, the impact on companies and industries could be substantial. We estimate, for instance, that in the US economy alone roughly 12 percent of all labor activity could be transformed by more distributed and networked forms of innovation from reducing the amount of legal and administrative activity that intellectual property involves to restructuring or eliminating some traditional R&D work.

Companies pursuing this trend will have less control over innovation and the intellectual property that goes with it, however. They will also have to compete for the attention and time of the best and most capable contributors.

2. Using consumers as innovators. Consumers also cocreate with companies; the online encyclopedia Wikipedia, for instance, could be viewed as a service or product created by its distributed customers. But the differences between the way companies cocreate with partners, on the one hand, and with customers, on the other, are so marked that the consumer side is really a separate trend. These differences include the nature and range of the interactions, the economics of making them work, and the management challenges associated with them.

As the Internet has evolved, an evolution prompted in part by new Web 2.0 technologist has become a more widespread platform for interaction, communication, and activism. Consumers increasingly want to engage online with one another and with organizations of all kinds. Companies can tap this new mood of customer engagement for their economic benefit.

OhmyNews, for instance, is a popular South Korean online newspaper written by upwards of 60,000 contributing “citizen reporters.” It has quickly become one of South Korea’s most influential media outlets, with around 700,000 site visits a day. Another company that goes out of its way to engage customers, the online clothing store Threadless, asks people to submit new designs for T-shirts. Each week, hundreds of participants propose ideas and the community at large votes for its favorites. The top four to six designs are printed on shirts and sold in the store; the winners receive a combination of cash prizes and store credit. In September 2007 Threadless opened its first physical retail operation, in Chicago.

Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles. But a company open to allowing customers to help it innovate must ensure that it isn’t unduly influenced by information gleaned from a vocal minority. It must also be wary of focusing on the immediate rather than longer-range needs of customers and be careful to avoid raising and then failing to meet their expectations.

3. Tapping into a world of talent. As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.

Top talent for a range of activities from finance to marketing and IT to operationscan be found anywhere. The best person for a task may be a free agent in India or an employee of a small company in Italy rather than someone who works for a global business services provider. Software and Internet technologies are making it easier and less costly for companies to integrate and manage the work of an expanding number of outsiders, and this development opens up many contracting options for managers of corporate functions.

The implications of shifting more work to freelancers are interesting. For one thing, new talent-deployment models could emerge. TopCoder, a company that has created a network of software developers, may represent one such model. TopCoder gives organizations that want to have software developed for them access to its talent pool. Customers explain the kind of software they want and offer prizes to the developers who do the best job creating itan approach that costs less than employing experienced engineers. Furthermore, changes in the nature of labor relationships could lead to new pricing models that would shift payment schemes from time and materials to compen-sation for results.

This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it. As companies move in this direction, they will need to understand the value of their human capital more fully and manage different classes of contributors accordingly. They will also have to build capabilities to engage talent globally or contract with talent aggregators that specialize in providing such services. Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.

4. Extracting more value from interactions. Companies have been automating or offshoring an increasing proportion of their production and manufacturing (transformational) activities and their clerical or simple rule-based (transactional) activities. As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today. Europe and Japan will experience similar changes in the composition of their workforces.

The application of technology has reduced differences among the productivity of transformational and transactional employees, but huge inconsistencies persist in the productivity of high-value tacit ones. Improving it is more about increasing their effectivenessfor instance, by focusing them on interactions that create value and ensuring that they have the right information and contextthan about efficiency. Technology tools that promote tacit interactions, such as wikis, virtual team environments, and videoconferencing, may become no less ubiquitous than computers are now. As companies learn to use these tools, they will develop managerial innovationssmarter and faster ways for individuals and teams to create value through interactionsthat will be difficult for their rivals to replicate. Companies in sectors such as health care and banking are already moving down this road.

As companies improve the productivity of these workers, it will be necessary to couple investments in technologies with the right combination of incentives and organizational values to drive their adoption and use by employees. There is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing in interactions will be challenging but critical for managers.

Managing capital and assets

5. Expanding the frontiers of automation. Companies, governments, and other organizations have put in place systems to automate tasks and processes: forecasting and supply chain technologies; systems for enterprise resource planning, customer relationship management, and HR; product and customer databases; and Web sites. Now these systems are becoming interconnected through common standards for exchanging data and representing business processes in bits and bytes. What’s more, this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.

During the late 1990s FedEx and UPS linked data flowing through their internal tracking systems to the Internet no trivial task at the time to let customers track packages from their Web sites, with no human intervention required on the part of either company. By leveraging and linking systems to automate processes for answering inquiries from customers, both dramatically reduced the cost of serving them while increasing their satisfaction and loyalty. More recently, Carrefour, Metro, Wal-Mart Stores, and other large retailers have adopted (and asked suppliers to adopt) digital-tagging technologies, such as radio frequency identification (RFID), and integrated them with other supply chain systems in order to automate the supply chain and inventory management further. The rate of adoption to date disappoints the advocates of these technologies, but as the price of digital tags falls they could very well reduce the costs of managing distribution and increase revenues by helping companies to manage supply more effectively.

Companies still have substantial headroom to automate many repetitive tasks that aren’t yet mediated by computersparticularly in sectors and regions where IT marches at a slower paceand to interlink “islands of automation” and so give managers and customers the ability to do new things. Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

6. Unbundling production from delivery. Technology helps companies to utilize fixed assets more efficiently by disaggregating monolithic systems into reusable components, measuring and metering the use of each, and billing for that use in ever-smaller increments cost effectively. Information and communications technologies handle the tracking and metering critical to the new models and make it possible to have effective allocation and capacity-planning systems.

Amazon.com, for example, has expanded its business model to let other retailers use its logistics and distribution services. It also gives independent software developers opportunities to buy processing power on its IT infrastructure so that they don’t have to buy their own. Mobile virtual-network operators, another example of this trend, provide wireless services without investing in a network infrastructure. At the most basic level of unbundled production, 80 percent of all companies responding to a recent survey on Web trends say they are investing in Web services and related technologies. Although the applications vary, many are using these technologies to offer other companies suppliers, customers, and other ecosystem participants access to parts of their IT architectures through standard protocols.1

Unbundling works in the physical world too. Today you can buy fractional time on a jet, in a high-end sports car, or even for designer handbags. Unbundling is attractive from the supply side because it lets asset-intensive businesses factories, warehouses, truck fleets, office buildings, data centers, networks, and so onraise their utilization rates and therefore their returns on invested capital. On the demand side, unbundling offers access to resources and assets that might otherwise require a large fixed investment or significant scale to achieve competitive marginal costs. For companies and entrepreneurs seeking capacity (or variable additional capacity), unbundling makes it possible to gain access to assets quickly, to scale up businesses yet keep their balance sheets asset light, and to use attractive consumption and contracting models that are easier on their income statements.

Companies that make their assets available for internal and external use will need to manage conflicts if demand exceeds supply. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

Leveraging information in new ways

7. Putting more science into management. Just as the Internet and productivity tools extend the reach of and provide leverage to desk-based workers, technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. From “ideagoras” (eBay-like marketplaces for ideas) to predictive markets to performance-management approaches, ubiquitous standards-based technologies promote aggregation, processing, and decision making based on the use of growing pools of rich data.

Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time. Intel integrates a “prediction market” with regular short-term forecasting processes to build more accurate and less volatile estimates of demand. The cement manufacturer Cemex optimizes loads and routes by combining complex analytics with a wireless tracking and communications network for its trucks.

The amount of information and a manager’s ability to use it have increased explosively not only for internal processes but also for the engagement of customers. The more a company knows about them, the better able it is to create offerings they want, to target them with messages that get a response, and to extract the value that an offering gives them. The holy grail of deep customer insightmore granular segmentation, low-cost experimentation, and mass customizationbecomes increasingly accessible through technological innovations in data collection and processing and in manufacturing.

Examples are emerging across a wide range of industries. Amazon.com stands at the forefront of advanced customer segmentation. Its recommendation engine correlates the purchase histories of each individual customer with those of others who made similar purchases to come up with suggestions for things that he or she might buy. Although the jury is still out on the true value of recommendation engines, the techniques seem to be paying off: CleverSet, a pure-play recommendation-engine provider, claims that the 75 online retailers using the engine are averaging a 22 percent increase in revenue per visitor.2 Meanwhile, toll road operators are beginning to segment drivers and charge them differential prices based on static conditions (such as time of day) and dynamic ones (traffic). Technology is also dramatically bringing down the costs of experimentation and giving creative leaders opportunities to think like scientists by constructing and analyzing alternatives. The financial-services concern Capital One conducts hundreds of experiments daily to determine the appropriate mix of products it should direct to specific customer profiles. Similarly, Harrah’s casinos mine customer data to target promotions and drive exemplary customer service.

Given the vast resources going into storing and processing information today, it’s hard to believe that we are only at an early stage in this trend. Yet we are. The quality and quantity of information available to any business will continue to grow explosively as the costs of monitoring and managing processes fall.

Leaders should get out ahead of this trend to ensure that information makes organizations more rather than less effective. Information is often power; broadening access and increasing transparency will inevitably influence organizational politics and power structures. Environments that celebrate making choices on a factual basis must beware of analysis paralysis.

8. Making businesses from information. Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities.

Frequent contributors to what economists call market imperfections include information asymmetries and the frequent inability of decision makers to get all the relevant data about new market opportunities, potential acquisitions, pricing differences among suppliers, and other business situations. These imperfections often allow middlemen and players with more and better information to extract higher rents by aggregating and creating businesses around it. The Internet has brought greater transparency to many markets, from airline tickets to stocks, but many other sectors need similar illumination. Real estate is one of them. In a sector where agencies have thrived by keeping buyers and sellers partly in the dark, new sites have popped up to shine “a light up into the dark reaches of the supply curve,” as Rich Barton, the founder of Zillow (a portal for real-estate information), puts it. Barton, the former leader of the e-travel site Expedia, has been down this road before.

Moreover, the aggregation of data through the digitization of processes and activities may create by-products, or “exhaust data,” that companies can exploit for profit. A retailer with digital cameras to prevent shoplifting, for example, could also analyze the shopping patterns and traffic flows of customers through its stores and use these insights to improve its layout or the placement of promotional displays. It might also sell the data to its vendors so that they could use real observations of consumer behavior to reshape their merchan-dising approaches.

Another kind of information business plays a pure aggregation and visualization role, scouring the Web to assemble data on particular topics. Many business-to-consumer shopping sites and business-to-business product directories operate in this fashion. But that sword can cut both ways; today’s aggregators, for instance, may themselves be aggregated tomorrow. Companies relying on information-based market imperfections need to assess the impact of the new transparency levels that are continually opening up in today’s information economy.

Conclusion

Creative leaders can use a broad spectrum of new, technology-enabled options to craft their strategies. These trends are best seen as emerging patterns that can be applied in a wide variety of businesses. Executives should reflect on which patterns may start to reshape their markets and industries nextand on whether they have opportunities to catalyze change and shape the outcome rather than merely react to it.

Obama will be a good president

Obama: Head or tail, history made

Away from our beleaguered stock market and the yet roiling global financial markets. At least, a little bit of sanity is returning to the Nigerian stock market though not by way of positive market activities, thankfully, the management of the Nigerian Stock Market has finally discerned the wisdom that informs free market activities by removing the one percent down limit on stocks price depreciation. Good enough, prices are stumbling; curiously, most hurt in the crashing prices are stocks of banks and insurance companies. The manufacturing sector is curiously holding steady, prices of UAC Nigeria, UAC Property and even those in the health sector; especially the pharmaceuticals have managed to hold their own at relative sliding rate. Does this tell a story?

 

I think it does, the power of any economy is a function of its real and active sector. Investors seem to have decidedly held faith with companies that are producing goods and products they can relate with and have turned their backs on the services of the financial sector with the average fall in price of stocks in that sector calculated at more than 50 percent. I guess it all about fears and negative sentiment. Yet, I can still dare to propose that in that sector lies the redeeming prospect of the market. Why?

Financial sector players understand the Nigerian economic market, perhaps, much more than any other sectoral player, and of course, they know how to get things done. They have been at the commanding height of the economy since the military inspired economic structural adjustment programme as influenced by the International Monetary Funds. Nigerian banks and bankers had survived much turbulence since 1993 when we first witnessed the first wholesale crash of the national banking sector and had returned stronger and better.

  So if First Bank is selling for less than 30 per cent of its peak price in 2008 at N20 plus and Access at less than 100 per cent of its high this year, I am tempted to go searching for value in the finance sector.

Please, excuse me, the stock market was not supposed to be in focus this week. I am very sure, the most discussed issue that would be discussed the whole of this week will be the USA presidential election while the most mentioned name any where in the corners of the globe this week will be Barrack Obama, that genteel, lithe figure that suddenly happened on the American political scene and had since captured the imagination of American across age, gender and other persuasion.

It’s natural to expect an opinionated African to canvass an Obama presidency, isn’t it natural? Of course, to my mind, this is the final resolution of the opposites that had defined relationship among people across the world, and for once, an indication that Africa, will, despite the interface of all morbid attributions in national leadership of countries across the black African continent, is where ultimate civilization and prosperity is headed. This may not be more than 50 years, I feel a reordering of the global economic space, an Obama USA presidency will be the beginning of the process.

Is this some fanciful thought? I don’t know, but it’s not every time that an individual, seemingly unqualified for a position just suddenly start marshalling the most effective strategies to beat political institutions in the United States.

The fact that Obama, a black-white man, or put properly, a white-black man (still wonder why they still primarily describe him as a black man as if the white gene and pigmentation of his mum were of no consequence) subsumed the Clintons and veteran John McCain in the opinion of people across the USA should convince anybody that Obama will be a good president.

No need to cajole logic and other persuasive argument about the worthiness of Obama, he has proved this by taking the battle to republican states and even competing on favourable numbers in McCain’s Arizona. And even more interesting, he turned the institution of the republican into a bleary eyed pumpkin mask only suitable to be laughed at during Halloween. Obama is that awesome.

So, can we be practical enough to stop all those talks of a McCain miraculous come as he had done before in those other elections into the senate. This is a different ball game; we are talking here about a phenomenon who is just being introduced to the world stage. Something tells me the world will not be the same after four years of Obama…but that will be if he survives the first term. Now, that’s talk for another day.