Safaricom IPO: Allocation results out

June 3, 2008
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, NAIROBI, May 30 – The long wait for investors in the Safaricom Initial Public Offer (IPO) to know their stake in the lucrative mobile phone company came to an end Friday night when the government released the issue’s allocation results.

And just like it was expected, Finance Minister Amos Kimunya delivered the verdict: All investors would at least get a minimum of 100 shares in the offer which raised Sh236.6 billion against a target of Sh50 billion indicating a heavy appetite for investments in good companies.

10 billion shares were up for grabs at an offer price of Sh5 per share.

While giving a breakdown of the results, Kimunya said both the local and international pools were oversubscribed by 453 percent, a move that reinforced Kenya as an important investment destination.

Within the domestic pool, the retail local pool had the highest subscription rate at 669.7 percent with the least subscription being experienced in the Safaricom employees’ category at 118.3 percent.

The Qualified Institutional Investors (QII) segment had a subscription rate of 320.8 percent while the authorised Safaricom dealers’ level was 324. 7percent.

Kimunya said each retail investor would get 21 percent of shares applied for, while the QII and the dealers would each get 31 percent of shares applied for.

Retail investors put out a request for 22.6 billion shares against the 3.38 billion that were on offer, while the QII category applied for 8.8 billion shares worth Sh43.8 billion against the 2.73 billion that were set aside for them.

Safaricom employees carried the day after it was revealed that they would get 84 percent of the 307.5 million shares they had requested for.

And just like it was provided for in the prospectus, the government did claw back 15 percent or 1.5 billion shares from the international pool after the local pool was oversubscribed by over 200 percent.

This meant that the international investors, with a subscription rate of 711 percent would only get a paltry 15 percent of the 14.2 billion shares they had asked for.

The elated minister hailed the transaction as a success saying that the many lessons learned would be applied in future transactions.

This was the first issue to be carried out under the Privatization Act and also the first time that online application was introduced.

The issue brought on board 860 000 new investors, (with 62 000 having made their application electronically) with many more investors riding on the back of institutions such as the NSSF that had bought shares on behalf of their members.

Kimunya also promised that the refunds would be processed quickly hopefully before June 9.

He said he looked forward to receiving a Sh51billion cheque, money which would go a long way in meeting the government’s obligations as set out in the national budget which he disclosed would be read on June 12.

The extra Sh1billion was as a result of the 10 percent premium (above the offer price of Sh5) that the shares were sold to the foreign investors through the book building method.

He defended the Sh5.50 price saying it was not under priced but had achieved its objective of giving Kenya the international exposure that the country, which is still reeling from the effects of the post election skirmishes, so desperately needed.

The shares start trading on the Nairobi Stock Exchange (NSE) on June 9.

Asked what strategies the government had put in place to tap into the liquid cash that Kenyans obviously had that could be mobilized for development of the country, Kimunya said they would be looking into its portfolio to see which companies it would offload to the market.

He cited Telkom Kenya and KenGen as some of the companies where it would divest its shares in the near future.

 However, the government would only sell its stake in profitable companies and not in those that weren’t performing well.

All investors will be waiting with bated breath to see the movement of the share price once it hit the bourse.

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