Business Daily (Nairobi)
Emmanuel Were
26 May 2008
Nairobi — Shareholders wishing to take positions on the Sh5 billion KCB rights issue have a week to tweak their portfolios, according to a time table for the share sale released yesterday.
The final day for shareholders to secure priority in buying the new shares is June 4 or Wednesday next week.
A rights issue is a sale of new shares where priority is accorded to existing shareholders, often at a discount on the market price. In KCB's case, each of the 200 million shares has been priced at Sh25, a discount on the last market price of Sh31. The ratio of the offer is one new share for every 10 held.
But analysts are giving differing opinions on the price outlook for KCB shares during and after the rights issue.
Housing Finance recently closed its books for the purpose of a rights issue. The ratio for offer, in the case of HF, was one new share for every one held at a discounted price of Sh20.
HF's share price rallied at the stock market, hitting a high of Sh50 before the register closed on May 12. Subsequently the share price fell to Sh30.
Resa Imbuye an equity analyst at Old Mutual asset managers says if investors believe that a company has potential of generating a certain amount of returns, the rights issue price should be immaterial.
"But now we have an inconsistent market scenario where things do not follow logic and in this case I see the price of KCB going down towards the Rights issue price, as some investors may think that is the ideal price of the shares," he says.
Eric Kimanthi, an analyst at stockbrokerage firm Kestrel capital has a different opinion on the direction of the share price.
"I do not see a substantial fall or rally in the KCB shares because at the ratio of the rights issue the earnings will not be diluted compared to the HF," Mr Kimathi said.
The KCB rights issue is scheduled to open on June 23, running up to July 11. Shareholders will have until July 25 to pay for shares taken up in the rights issue.
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