NAIROBI, Aug 23 – The British-American Group Initial Public Offer was undersubscribed by 40.1 percent raking in Sh3.5 billion against a set target of Sh5.85 billion.
While releasing the results, the company blamed tight liquidity and the debt crisis in the US and the Eurozone as some of the factors that hindered it from raising the full amount.
“A 60 percent subscription is a commendable outcome in the light of what is currently happening in the financial markets. It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya,” said the Group Chairman Nicholas Ashford- Hodges.
The investment firm however did surpass the minimum success threshold of Sh2.92 billion buoyed largely by the participation of retail investors, employees, agents and policy holders whose categories were oversubscribed.
Retail investors and employees took 70.9 percent and 5.2 percent of the subscription respectively.
Qualified institutional and international investors on the other hand seemed to snub the offer as their combined application stood at 24 percent of the total shares on offer.
This is despite the international road shows that the investment firm carried out immediately the IPO was launched that saw them meet over 30 institutional investors as they drummed up support for the offer, which was priced at Sh9 a piece
Foreign investors and East African retail investors have been allocated 30 percent of the 650 million new ordinary shares on offer each while a further 37 percent has been reserved for institutional investors.
Although a statement from the firm did not indicate how the shares will be allocated, the company’s prospectus spells out that in the categories that the shares are undersubscribed, the applicants will get their allocations in full.
This effectively means that the foreign and institutional investors will get their full allocation of 93.5 million shares valued at Sh842 million.
The remainder of the available shares will thereafter be allocated to local investors, employees, agents and policyholders on a pro-rata basis.
“Applicants in the Employee, Agents, Individual Life Policy Holders category and the East African Retail Investor category will be allocated the number of shares applied for upto 2,000 offer shares in the first instance and thereafter in multiples of 100 offer shares on a pro rata basis,” read the prospectus.
This method of allocation sometimes means that some investors might receive fewer shares than they applied for. But given that the total number of shares applied for was 390.5 million against the floated 650 million, it remains to be seen what the firm will deal with the issue.
However, these provisions are provided for in the information memorandum and the decision is likely to be published in the local dailies in at least two days.
Meanwhile, despite its failure to achieve its target, the management is optimistic that the amount raised will still enable them to meet their obligations.
Their intention was to use the IPO’s proceeds to open up new outfits in the East African region which would enable them to take advantage of the huge potential that the neighbouring countries presents to increase their footprint and grow their business.
In addition, the firm wants to go big into property development with a big chunk of the funds going towards achieving this objective.