Thread by @ugodre

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This is part 3 of our Oando Story

If you are just joining this thread, we suggest that you start from Part 1 and 2

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1. Acquiring COP in hindsight appeared to be a massive game changer and would proper JAT and Mofe to the top of Africa’s Oil.

2. In fact, just 3 years earlier in 2011, Forbes Africa Magazine had dubbed JAT...”The King of Africa’s Oil.”

3. It was a reputation he would have to live up to.

He who wears the crown must bear its weight they say

4. The drop-in oil prices and the potential headwinds that was lurking were worrisome

5. but the reward for owning COP clouded any worries him and his investors may have had.

6. Stakeholders, including banks, were also reminded of the benefits of owning COP. They owned 95% of the potentially lucrative OML 131

7. The deal it was reported, also included a 17% interest in Brass LNG Limited. Who could doubt the might of such as asset?

8. The comfort of COP assured, if temporarily, banks and other investors that everyone would be taken care of one way or the other

9. In fact, JAT also loved to pay dividends. For 9 years, between 2005 and 2013, a total of N30b was paid as dividends.

Everyone was happy

10. Despite a falling share price, late, 2014, the company had at least, made some money for investors in the capital market.

11. In the stock market, smart money viewed price volatility as an opportunity to take huge bets.

12. You would buy low and create a sense of demand, with one eye on those greedy retail investors, who knew little about playing the market.

13. Shrewd investors had a name for them. They were called "greater fools"

14. Just as JAT took care of his investors and banks, he also had a way of taking care of his own.

15. Page 158 of the 2014 annual report listed about 21 related party transactions that involved companies,

16. with whom the directors had interest in, that provided services for it.

This was by no means illegal.

17. Anyone who mattered was well taken care of, including JAT.

18. For example, Triton Aviation Ltd, a company reported as owned by JAT, the Group Executive Officer (GCE) as he is officially referred to.

19. provided management services worth N409 million to Churchill C-300 Finance Limited, one of the many companies owned by Oando Plc.

20. But the single biggest of them all went to, Intels Ltd, the company owned by Volpi.

21. Intels West Africa Ltd provided cargo handling operations worth N1.1 billion to Oando Energy Services Limited in 2014.

22. Everything it seemed, was under control and who knows? the drop-in oil price may well, just be a blip.

23. This, perhaps played in his mind when he made that famous tweet in December of 2012.

24. But they won’t take chances. The company had also perhaps, envisaged an urgent need to raise capital.

25. The sense of urgency was clear as oil prices were tanking and the outlook for 2015 was not so rosy.

26. Better to raise capital now than wait when the sh*t hits the fan.

27. And so, they rushed to announce a rights issue that will cost shareholders N22 per share & help the company raise about $300m (N48b)

28. The offer was so swiftly announced they forgot they were yet to obtain SEC approval/consent as is required

29. SEC would promptly suspend the offer, a decision that would prove costly down the line.

30. As the cold harmattan hayes of Xmas neared, hope was in the air that perhaps, things might still swing their way.

31. However, a few weeks later and as the world ushered in a new year, oil prices would drop below $50, for the first time in 9 years.

32. The pressure, was on, not just for the oil industry but for the Nigerian Economy.

33. With the election looming, amidst threats of violence and a gloomy economy, the stock market took a drastic turn for the worse

34. The stock market All Share Index, used to measure stock performance, will drop by a whopping 14.7%, the largest drop since October 2008.

35. By d time d dust had settled, investors had lost a whopping N1.6tr in 1 month. It would come to be referred to as the January massacre.

36. Oando wasn’t spared, as you would come to expect. That SEC suspension of its rights issue had indeed proven costly.

37. The share price of Oando Plc would crash to about N16 at the end of January, losing 27%.

38. This is not the sort of setback to deter JAT and Mofe. The stakes were too high and there was no going back.

39. By January, SEC had approved the rights issue and Oando will go on to raise capital at a share price of N16.5.

40. The share price will hold steady for the next 12 weeks rising as high as N17. But investors were already getting wary.

41. It was the summer of 2015 and no one had seen their 2014 annual report. In fact, it was also yet to release its 2015 Q1&Q2 result.

42. Investors would not have it any longer. The suspense was too much to handle, especially with oil prices now to a new low of $43.

43. Oando share price would soon drop to N12.50 with a whopping N90billion wiped out off its market share.

44. By mid-October, the share price would drop below N10 for the first time in years.

45. Despite this drop, some took cold comfort in the fact that the stock market was crashing and oil and gas stock was taking a beating.

46. It wasn’t just an Oando problem, this was a wider stock market crisis.

47. Some investors, in their apparent “wisdom”, would go on to even buy the shares.

48. After all, a renowned American investor whom the world viewed as the greatest ever investors, had once said.

49. “Be greedy, when others were fearful and fearful when others are greedy”.

50. It appears in hindsight, that he may had been quoted out of context.

In Nigeria, things work differently

51. Oando dropped its much-awaited result on the 23rd of October 2015.

It did not 'disappoint'.

52. The company had recorded a monumental loss of N184 billion in 2014, the largest ever by a quoted company in Nigeria.

53. Oando had recorded many first in the history of corporate Nigeria but no one imagined the size and the ramifications of this first

54. It perhaps explained the reason for the delays. They say when it rains it pours.

55. They say when it rains it pours.

The company had taken what accountants call an impairment on all its legacy holdings.

56. Total write offs of its upstream assets were about N73 billion.

To make matters worse, the auditors would also report a major breach.

57. According to them, Oando had “paid dividend from unaudited reserves as at June 2014.

58. However, as at year-end there was insufficient reserves to absorb the dividend paid.” EOQ

59. In simple terms, it paid dividends to in July '14, in advance of profits, which it thought would remain in its accounts by year end.

60. After all, it was July 2014 and Oil prices still looked good so someone 'excited' may have projected a bumper profit by year end.

61. It’s like eating your cake before you had it.

But by December, there was actually no cake to be eaten.

62. The profits it had accumulated in its reserves all these years were wiped out in one fell swoop.

COP was not what it seemed

63. Auditors would again question the going concern status of Oando.

64. They worried that it may not remain a business, disclosure auditors make when a company current liabilities exceed current assets.

65. But this was an Oando led by JAT and Mofe.

66. They had not fought all these battles to let their hard-earned company go up in smoke.

They soon went to work.

67. In December 2015, they announced that they had bought out the minority shareholders in OER,

68. the company listed in Toronto Stock Exchange and which owned COP.

It would be a move of a grand master

69. They held on, even as share price would slide to under N4 by the turn of the new year with more losses in its wake.

70. 2016 held some promise and JAT would later tell shareholders in the AGM of 2016 that

71. “we faced each challenge with renewed vigor and recorded significant milestones….”

72. Our three key business drivers remain: Growth, Deleverage and Profitability.”

73. The strategy in effect was to sell some of their assets and restructure their debts. The latter was more precarious. It had to be done

74. If the banks call in their facility, it could spell huge trouble. Banks also knew this was not d route they wanted to but waited on JAT

75. They were all in this together and so a restructuring of their debts was announced in June 2016.

76. And so 10 Nigerian banks would come together and restructure N95b in loans owed by Oando.

Only JAT & Mofe could pull this off

77. This feat that nearly went unnoticed nearly swallowed a telco this year, if it wasn't for regulators.

78. The deal allowed Oando to freeze payment on principal for three years allowing them to only service interest.

79. This was huge as it meant at least that they could not go solvent.

JAT had survived once again.

But battles lay ahead

80. In July of 2016, they would announce a mega $210m deal with HVI ,a joint venture owned

81. by Helios Investment Partners and Vitol, a world leader in oil marketing.

82. The JV would own 49% in a significant part of Oando’s downstream business under a new entity called OVH Energy (“OVH”).

83. By September of 2016, Nigeria’s economy took a turn for the worse. The economy was deep in recession and oil prices had nosedived.

84. The government was scrambling for revenues and searched in all places. They pulled funds from banks into a new pool called TSA

85. Politicians brandied thoughts of new taxes on d rich & increase in tariffs. Trials of corruption cases began in the pages of newspapers

86. The government had its sights on everything, they even took security of oil installations from Militants

87. And so, it was no surprise that they would go after ports, a major cash cow for government

88. The ports were target and thus for the first time in years, challenged the monopoly of Intels, owned 70% by Volpi.

89. The pressure was seemingly on and revenues was shrinking for most businesses in the country.

90. Even Nigeria's richest man saw his position on Forbest list plummet against his fellow billionaires around the world.

The rich cried

91. As you would expect, business owners started looking inwards and around to see which asset they could latch on to.

92. It was the time when owners of business long forgotten, rang CEOs for regular updates on the financial status of their investments

93. In July 2017, a local news channel broke news that the SEC had suspended the AGM of Oando which was to take place on September 11, 2017.

94. Oando was livid and the network soon withdrew the news from its websites, perhaps out of fear of litigation.

95. But Oando would admit soon after that they were under investigation but that the AGM was yet to be suspended.

96. As rumours swelled and more facts emerged Oando would later reveal who had written the petition that instigated SEC investigation

97. Volpi and Mangal, two businessmen that JAT had reached out to during the COP transactions had petitioned SEC.

98. A newspaper article would subsequently allege that they accused the company of

99. falsifying their financial statements and wanted JAT, MOFE and the board to step down.

100. The report also claimed Mangal claimed he owned 13.9% of Oando Plc, and not the 4% recorded in the shareholder register.

101. Oando of course denied all the allegations of wrong doing.

102. JAT in his defence has stated that the disagreement between himself and Volpi over the $80 million

103. lent to him by Volpi to acquire a stake in OODPL, is currently before an arbitration panel.

104. Debtors at least, had a right to fair hearing, one analysts would remark. Creditors only had to be patient.

105. Investors were not aware that apart from extending the $50m loan to OODP to help pay for the 25% of COP, Volpi had also lent JAT $80m.

106. You would think this all meant he perhaps owned Oando Plc. But this is not how things work in the corporate world

107. Oando reportedly claimed that the move by Mangal and Volpi was a ploy to takeover Oando Plc and remove him from office.

108. A company he ostensibly founded years ago.

109. He also claims Ansbury Plc, had a representative on Oando’s board who approved

110. the company’s 2015 financial statement, which Volpi alleges were 'cooked'.

111. JAT and Mofe were used to many challenges, ranging from funding, listing, oil prices, being called "too young" and often laughed at

112. But never before had they faced a board room squabble. They type that could threaten ownership and control of their beloved creation.

113. The AGM taking place was the true test and SEC, they believed held the aces.

114. SEC would later allow Oando proceed with its AGM, stating that the petitions

115. by the aggrieved parties do not warrant the suspension of the company’s AGM.

116. SEC further advised the petitioners to seek a court order restraining Oando from holding its AGM.

They didn't stop there

117. The regulator also advised Ansbury Plc, Volpi's vehicle to write to Oando seeking representation on its board.

118. . SEC claims it can still reverse any decision taken in the AGM, if further information that can instigate such is brought forward.

119. This was by analysts accounts a master stroke and a result of all the complex shareholding structure that Oando had created years ago.

120. It was as if they new one day the chicken would come home to roost but made sure when that happened they won’t be home.

121. JAT and Mofe's complex shareholding structures were such that, Volpi’s company, Ansbury had no direct shareholding in Oando Plc.

122. As allegedly claimed by the petitioners in the newspaper report

123. Shareholding structure as explained by Oando Plc

124. All they owned were shares in OODP registered in the British Virgin Islands, which in turn owned shares in OODP registered in Nigeria

125. Which in turn owned shares in Oando Plc. Volpi thus, analysts explain, will need to kick JAT out in BVI before he gets to Nigeria

126. Some analysts even opine, that this was perhaps why SEC could not act. No Nigerian entity was in trouble here.

127. Retail investors and local shareholders, were not the petitioners so SEC had to wash its hands clean & refer d matter over to d courts.

128. The courts some said, would first entertain arguments surrounding jurisdiction as both companies are not registered Nigerian entities.

129. Some also claim a good lawyer could perhaps swing the case in Volpi's way if he argued differently.

130. Another card which they may have played was putting pressure on Oando’s investment abroad.

131. But JAT and Mofe had delisted OER from d Toronto Stock Exchange.

Either by providence or being smart, it was a move of a grand master.

132. OER whom everyone thought was owned by Oando Plc, was always owned by OODP.

The "Oando" in the "ER"...well....

133. Mangal also had an issue it seems.

134. By not disclosing that he owned a further 13.9% of Oando, lawyers claim he may have contravened a CAMA provisions.

135. In Nigeria, shareholders who own more than 5% of shares in a publicly listed company had to disclose it. Oando claims he did not

136. To be fair, Mangal and Volpi were yet to make official statements thus arousing major suspense for all stakeholders

137. And so, as the AGM loomed on the 11th management of Oando worked all weekend to ensure that it not only took place but successfully so.

138. The PR machine was in full gear. Reports suggest social media influencers were mobilized to action. The media stayed coy

139. Success by most counts was to get the audited accounts approved with JAT & his board securing their positions as directors of Oando Plc

140. They left no chances to bare. .

141. Sources suggest that they had lawyers stationed in nearly every high court in case anyone filed an injunction against the AGM

142. The AGM would hold amidst some protest but just as they wanted everything went as planned.

143. The accounts were approved and JAT and Mofe will retain their positions at GCE and DGCE.

144. JAT and Mofe may not be feared businessmen or street as some would opine. However, one thing was clear

145. They have demonstrated over time that they are "Corporate Kings" and master "manipulators" of laws that govern shareholding structures.

146. Their notoriety may attract many critics and or even more fans. But corporate Nigeria have here, two guys not ready to bow out

147. We have come to the end of this episode of corporate stories on Oando.

I would like to thank the fantastic team at Nariametrics

148. For the great research work used in presenting this thread. Materials for this thread were obtained from Annual reports, press releases

149. Info memorandum, NSE filings and company websites and other publicly available information.

This thread is a Nairametrics creation

150. Feel free to give us feedback should you not agree with any of the tweets over the course of the 3 parts. We love feedback

151. Watch out for our Book on Corporate Stories and who knows, maybe a movie

152. A version of this thread will appear on Nairametrics on Wednesday, September 13, 2017 for you to share and maybe use as case study.

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155. Thanks and till we meet again next month for another corporate story, do have a wonderful week.

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