Concept Advisory Services

• Progress on Safaricom IPO

  Posted: April 2, 2008, 6:45 pm by CRB

  The enthusiasm shown by investors on the Safaricom IPO is impressive. Even with the negative publicity, scores of investors are lining up to apply for a share of the most profitable company in the region. The bug has caught even the cautious Ugandans and I understand there is a lot of interest from that side. Our politicians finally gave up though I did not take them seriously in the first place: I mean, if they were not for the sale the simplest thing would have been to file for an injunction and halt the process. Talk of playing with people’s emotion.

  But I did agree with them on the issue of disclosure. Our capital markets will not reach he projected highs if deals are within ‘an old boy’s network’ as it is the case with Safaricom shareholding where Mobitelea acquired a 10% stake without any form of consideration.

  I also understand that Kenyans have taken up well the issue of online application. I have checked it and its simple enough for an average investor. Majority of investors are still wary of the process and would rather stick to the old and tested way of application. Moreover, I can understand their concern since online application removes that personal interaction between an investor and the broker.

  There is no doubt that the share offer is going to be oversubscribed considering banks and employers are financing up to even a 100%. This is advantageous to those who will dig into their savings as they can dispose even in day one in the secondary market. In financing, the shares allocated will act as security. As we wait for refunds they is a likely hood of the share appreciating; lets admit it, even at k’sh 7 it is still a fair deal. My only concern is this time around we may not see the 300% or even 200% appreciation on the first day of trading as we have been accustomed to. There is a large amount of shares in the hands of retail investors whose aim is to make a quick buck. A slight appreciation will result in a high supply thus depressing the market.

  I had expected other counters at the NSE to be performing poorly but not at the current rate. The prices have corrected in regard to the offer but only with a small margin. Actually, since the opening of the offer the NSE index has been climbing. With the realization that it will not be a full allocation savvy investors are looking into the other counters. I am seeing this change in the next two months. Upon listing and assume the price does not rise in a big way there will be a lot of interest as both retail and corporate investors take their position with the future firmly in mind. Other counters will be ignored albeit temporary. Their prices may not go down but will not go up either as investors adopt a wait and see attitude.

  There are a couple of things to learn from this IPO. One is on the success of online application. Will it be as messy as the manual? Can it serve us with the next offer? I am also interested with how the foreign investors are seeing the offer. Their price will be through the infamous book building process. And considering how the year began for Kenyans, will the foreigners find the offer attractive. This includes our neighbors who for all intent and purposes are foreigners. As William Ruto pointed out, this company has been built from scratch with the sweat of Kenyans and Kenyans should derive maximum benefit before we can invite a third party.

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Fish cakes

Alas a fish cake.

Yet more fish cakes

Guess what ... yeah ... fish cakes.

The end of the fish cakes