Joseph Bonyo
29 October 2008
Nairobi — Will the seven million plus members of the co-operative movement help the Co-operative Bank Initial Public Offering (IPO) pull through?
This is the debate going on as the offer comes to the market Thursday.
Opening at a time when the Nairobi Stock Exchange has lost over 20 per cent on its share index, opinion is divided on its likely performance.
The bourse Wednesday lost 70.55 points, taking it further down and escalating a trend that started about three months ago.
"The conditions are very difficult at the market as we have never experienced prices going this low. However, this is only a temporary measure that will end with time," said Mr Job Kihumba, a director at Standard Investments Bank.
The bank is off-loading 701.3 million ordinary shares to a market that is subdued and grappling with fading investor confidence. The offer seeks to raise Sh6.7 billion for the bank's expansion programme, a climb-down from an earlier Sh10 billion.
The sustained poor performance of the NSE may put a damper on the offer, but other favourable but unique factors may come into play.
"Major shareholders of the bank are co-operative societies who have supported the bank over the years and will definitely participate to increase their holdings as individual shareholders," said Mr Maurice Opiyo, a market analyst with Old Mutual Investment Group.
Currently, the country's co-operative movement boasts of about seven million members from 10,800 registered societies.
"They might mitigate possible under-subscription within the retail investors pool should the general "retail investors" fail to mop up all their allocation," added Mr Opiyo.
He said that the sentimental value attached to the bank by member organisations may underwrite its success.
Retail investors, who are the main target for the offer have had some 66 per cent of the shares set aside for them. So-called "qualified" institutional investors and bank employees have been allocated 30 per cent and four per cent respectively. This leaves out foreign investors who have previously enjoyed a reserve on shares from previous offers.
Mr David Mworia, investment advisor at Prudential Financial Services, however, thinks otherwise.
"We are not seeing any inquiries like in the previous offers, the spirit of investors is dampened," he said.
An argument is also being advanced that institutional investors may take advantage of a likely poor show by retail investors, though Mr Kihumba said this may not materialise.
"Institutional investors base their buying on market analysis and this may play to the advantage of the retail investors. They calculate before making a move," pointed out Mr Kihumba.
The minimum allocation for retail investors and the employees has been put at 1,000 shares and thereafter multiples of 100 shares.
Institutional investors will get a minimum of 100,000 shares and thereafter multiples of 10,000.
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