NAIROBI, March 27 – Experts predict that the Safaricom share price will double on the first day of trading at the Nairobi Stock Exchange (NSE).
The much–awaited Initial Public Offer (IPO) opens Friday and will close on April 23. The proposed listing date is May 30.
President Mwai Kibaki is expected to launch the offer at the Kenyatta International Conference Centre (KICC).
Faida Investment Bank Managing Director Bob Karina told Capital Business Thursday that the mobile phone operator’s shares are on demand from both local and international investors as it is one of the most profitable companies in East Africa.
Each share is priced at Sh5 making it affordable to most people.
The telecommunication firm recorded a net profit of Sh12 billion for the year ended 31st March 2007 and has a subscriber base of close to nine million customers.
The government plans to sell 25 percent of its 60 percent stake at the company to raise Sh50 billion.
The sale is part of the government’s ongoing divestiture policy which seeks to among other things implement its long-term reform agenda of divesting from commercial activities, to concentrate on its role of creating an enabling environment for doing business and deepening the capital market.
Assuming the offer is fully subscribed, the shareholding structure will see the government holding a 35 percent stake and the public owning 25 percent, while Vodafone Plc will have a 40 percent share in the company.
The offer, billed to be the largest transaction in the East and Central Africa region is open to all citizens of the East African Community (EAC) member states.
“For the first time, investors from Uganda, Tanzania, Burundi and Rwanda or companies incorporated under the EAC partner states laws, will be treated as Kenyans,” Karina said.
Such investors form the retail pool, which according to documents in Capital Business’ possession will get 3.38 billion shares, which is 52 percent of the 6.5 billion shares allocated for the domestic pool.
The Offer consists of domestic retail, qualified institutional investor, Safaricom dealer; employee, and the international pool.
The domestic retail, qualified institutional investor, Safaricom dealer and employee pools are collectively referred to as the Domestic Pool.
Authorised Safaricom dealers and the operator’s employees will also get a chance to participate in the offer and it is proposed that each category will get 130 million and 260 million shares respectively.
Only institutional foreign investors and not individuals are allowed to participate in the IPO.
The applications can be done online through a new website, www.kenya IPOS.co.ke.
Karina said stockbrokers have for the last two weeks been recording booming business owing to the large number of investors who were rushing to open up CDS accounts in readiness for the sale.
“We are receiving a lot of enquiries on the performance of the companies, the allocation policy of the offer and also get clients who are making deposits,” he stated.
The MD explained that although investor confidence had been eroded following the near collapse of two stockbrokerage firms in less than 12 months and rumours of financial problems at Reliable Securities, clients could count on the Capital Markets Authority (CMA) and the NSE to safeguard their interests.
He stated that the regulators now require the brokers to present their financial statements at the end of every month and this would present clients with the opportunity to identify firms that were having financial problems.
Once the shares hit the market, Karina projects that it is likely to push the market capitalization over the one trillion shillings mark, a move that heralds a big boost for the Kenyan market.
Currently, the capitalization stands at slightly over Sh800 billion.
He observed that foreign investors are usually long term clients who don’t sell their shares as easily when they hit the market and this helps to hold the price of the share.
“The presence of foreign investors helps to market a company internationally and this attracts more outsiders,” he observed.
Noting that the capacity of the players to handle an offer of such magnitude had been questioned by many people, Karina assured that all parties have put in place the necessary measures to ensure that they are ready for the transaction.
It is estimated that the Safaricom IPO will bring on board more than one million new investors.
The Central Depository Settlement Corporation (CDSC) Limited management recently announced that it had increased its investor accounts capability from 800,000 to eight million.