By Victor Juma
In Summary
- Long-term investors, State make billions from issue which exposed gaps in capital markets.
This weekend marks five years since Safaricom was listed at the Nairobi Securities Exchange after selling 10 billion shares to the public.
The event marked a watershed in Kenya’s capital
markets and settled the argument whether there was the appetite and cash
to support multi-billion-shilling calls.
Prompted by the government’s need to raise cash
and give Kenyans bragging rights of owning a piece of the most
profitable company in eastern Africa, the initial public offering (IPO)
was historic for its sheer scale, the massive oversubscription and the
revelation of Mobitelea, a shadowy investor in the company’s books.
To date, the faces behind Mobitelea, who have
since sold their five per cent stake in the telco to London-based
Vodafone, remains a mystery despite investigations by Parliament and
UK’s Serious Fraud Office (SFO).
To investors, however, Safaricom’s IPO presents
mixed fortunes and feelings. Along the way, some investors have made
millions while others have lost a small fortune.
The company has had a remarkable performance and
remains by far the most profitable business in the region, ring-fencing
its fortunes by the proprietary money transfer service M-Pesa that was
developed by Englishman Nick Hughes.
Economic outcomes of investing in the telco have
largely been determined by the holding period, trading strategies,
number of shares, and whether the shares were imprudently bought using
bank loans.
An IPO of such a scale was also bound to magnify a
number of problems in the capital markets and financial system,
including outright fraud, profiteering by banks, and the mess that was
the refunds and share registration processes.
The government came out ahead in the IPO, netting
Sh51 billion for the 10 billion shares it sold to local and foreign
investors who had placed in bids worth Sh231 billion or an
oversubscription of 360 per cent.
The Treasury, which retains a 35 per cent stake in
Safaricom, together with Vodafone (40 per cent) have earned billions of
shillings in dividends, helped by their large share volumes and special
status either as regulators or trading partners of the telco.
For retail investors, the company’s sterling
performance has done little to cause excitement, with the majority
earning dividends of less than Sh200 and whose cheques or M-Pesa credits
can hardly be cashed economically.
Minority shareholders have over the years piled
pressure on the company to buy back some of the floated shares in a move
that would reduce supply and thereby drive up the stock’s price.
The board has, however, noted that Kenyan laws
don’t allow share buybacks, adding that an alternative solution would be
to get a strategic investor.
This has left small investors with the sole option
of selling their shares at a higher price. This opportunity has,
however, been absent for most of the past five years during which the
stock traded at below the Sh5 IPO price, with the share flirting with
the Sh2 mark for a while.
In the meantime the Telco has acquired more
customers and diversified into the data business, helping it to maintain
a strong performance that has finally fired up the stock
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