East African investors buy least stake in sale of bourse shares

An investor at the Nairobi Securities Exchange August 1, 2014. Data shows that investors from East Africa, excluding Kenya, accounted for only 0.6 per cent of the total participants in the largely successful IPO. PHOTO | SALATON NJAU 

By JOSHUA MASINDE

In Summary

• Foreign investors, who are largely dominant in the stock market, accounted for 22.9 per cent of total participants in the IPO.

Investors from East African countries kept off the just concluded Nairobi Securities Exchange initial public offering, applying for the least shares among categories of buyers. Data shows that investors from East Africa, excluding Kenya, accounted for only 0.6 per cent of the total participants in the largely successful IPO.

Analysts who spoke to Smart Company said foreign exchange risk and the fact that the NSE will not cross-list in neighbouring countries may have dampened their appetite. The poor show is despite move to categorise EAC investors as local thus reducing the tax payable on their investment, in an effort to integrate the regional markets.

Kenyan retail buyers, who constituted 41.6 per cent of the 17,859 investors, provided the strongest support that saw the IPO attain a 663 per cent over-subscription.

Demutualise

Despite the relatively small size of the IPO compared to previous offers, the subscription rate stood at 763.9 per cent, denoting huge appetite for the stock that was sold at Sh9.5 apiece.

“We expected the oversubscription taking into account that this was the only IPO since Home Afrika that was listed in the GEMS segment last year and since the exchange was self-listing, being the second exchange to demutualise after the Johannesburg Stock Exchange,” analysts at Old Mutual said in a report to investors.

Kenyan corporates accounted for 34.9 per cent of the total participants despite earlier indications that large institutional investors decided to keep away on fears that they would be under-allocated shares in the event of an oversubscription.

A total of 17,859 investors applied for the 66 million shares on offer

Second bourse

“This is the highest oversubscription in the 60-year history of the Kenyan market. The results are a clear indication of the demand from domestic and international investors for investment opportunities in the capital markets,” NSE management said.

Foreign investors, who are largely dominant in the stock market, accounted for 22.9 per cent of total participants in the IPO. The offer was divided into public and employee pools, both of which were oversubscribed by 687.18 per cent and 72.97 per cent respectively.

Applicants from both the employee and the public pools applied for 504.2 million shares valued at Sh4.79 billion. This was way above the Sh627 million the NSE was targeting.

The new shares sold in the IPO are to start trading on the Main Investment Market Segment of the bourse starting today when a total of 194.6 million issued and fully paid up shares of the NSE will list.

The NSE now becomes the second bourse in Africa, after the Johannesburg Stock Exchange to sell its shares in an IPO and self-list.

New products

Although they have an interest in the NSE, most investment bankers and stockbrokers have maintained a positive outlook on the stock.

The Exchange plans to settle a Sh300 million mortgage debt it acquired in 2012 to purchase its current headquarters in Westlands, Nairobi, with some of the funds raised. The IPO sought Sh627 million from sale of 66 million shares to the public.

Some of the funds will also be used in upgrading the bourse’s infrastructure in preparation for introduction of new products such as the Exchange Traded Funds, the Real Estate Investment Trusts and to pay licence for planned Futures market.

“We are confident that over the next four years, we will achieve our strategic objectives of 100 equity listings and Sh4 trillion equity market capitalisation,” outgoing NSE’s chief executive Peter Mwangi said.

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