Business Daily (Nairobi)
James Makau
23 April 2008
The cash forked out by retail investors for the Safaricom initial public offering is likely to surpass the targeted Sh17 billion.
Estimates by stockbrokers indicated that the issue would be oversubscribed as was the case with recent IPOs, raising hopes that the share price would appreciate significantly on listing at the Nairobi Stock Exchange.
About 3.28 billion of the 10 billion shares on offer at Sh5 per share were reserved for retail investors. Institutional investors in the domestic category - defined as citizens and corporates from Kenya, Uganda, Rwanda, and Burundi - had a quota of 3.22 billion shares.
Tanzanians would have fallen in this category under the East African Community ambit but were barred from participation by the country's foreign exchange controls.
International investors had 3.5 billion shares provisionally reserved for them.
A last minute rush for the Sh50 billion was a source of relieve to arrangers who had feared a weak ago that the retail segment would not find enough takers.
"Based on the interest we have witnessed so far, we estimate that there will be an oversubscription of 200 per cent," says Bob Karina, managing director of Faida Investment Bank. He added that his bank had registered Sh2 billion in applications on by Tuesday.
With the government's objective being as widespread local retail participation as possible, an over subscription of more than 200 per cent in the retail segment will lead to a clawback of shares from the international pool.
It is widely expected that shares in the other pools - employees, Safaricom dealers and qualified institutional investors- will also be snapped up.
Reliable sources had told the Business Daily that by Monday evening, the money forked out by retail investors had hit the Sh16.9 billion mark, just Sh100 million short of the full Sh17 billion worth of shares available for retail investors.
An oversubscription in the retail segment would translate into lower share allocations for individual investors.
The allocation policy in the Safaricom prospectus stipulates that in case of an oversubscription, applicants will be allocated 100 offer shares in the first instance and thereafter in multiples of 100 offer shares on a pro rate basis.
While this might be a killjoy of sorts for investors who had applied for large amounts of shares in the retail pool, investors will be banking on a substantial rise in the price of the shares within the first few days with their eyes firmly set on quick capital gains.
Investors in the international pool will be crossing their fingers that the oversubscription in the retail segment does not surpass 200 per cent.
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