East African Business Week (Kampala)
Abwao Oluoch
28 April 2008
Nairobi, Kenya — The fate of investors who put up purchase bids for some 10 billion ordinary shares of profitable mobile phone firm, Safaricom in an Initial Public Offer (IPO) will be known on May 21, 2008 before the battle moves to the bourse.
The Safaricom IPO, billed as the region's largest single listing, had attracted slightly more than two million prospective buyers days to the close of the sale. But even as the deadline for filing the paperwork elapsed, long queues were still evident in Nairobi.
The Nairobi Stock Exchange (NSE), on which the Safaricom shares are expected to be listed for trade effective June 9, is now the new battlefront on which East Africa's new stock entrants will pin their hopes as the latest "penny stock" begins to trade.
Safaricom's Ksh5 a share was meant to please, attract the widest possible reach among the ordinary East African folks and all indications are that the mission was accomplished.
The fate of the investors, however, depends on a series of factors, including speculation on demand and supply of the stock, which would decide whether the initial price goes up.
Stock analysts have already predicted that Safaricom investors might not triple their fortunes as happened in the past IPOs, such as the Kenya Electricity Generating Company (KENGEN), which traded between three to four times its IPO value.
Kenyans, stock analysts say, are still grappling with best ways of entering the stock market in any ways other than through an IPO, which is the trend that has seen the NSE grow its list of electronic accounts from less than 50,000 to more than 800,000 investors.
Safaricom is sure to double or even triple the number of investors participating at the NSE. Currently, stockbrokers and institutional investors, who have for ages monopolized the NSE, have seen high growth in the number of retail investors.
The growth in the number of retail investors has been to the advantage of the stockbrokers, who are entitled to about 10% of the gains made by the small-scale investors.
Commercial banks too, have made a killing from the Safaricom IPO, with the commercial institutions competing with each other on the provision of loans.
Equity Bank, Kenya's fastest growing financial institution, announced at the conclusion of the Safaricom IPO that it had approved loans worth Ksh4 billion to retail investors and was due to approve requests for loans worth Ksh7 billion from institutional investors.
Safaricom IPO is expected to surpass its initial target of Ksh50 bn.
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