11 November 2012

Uganda: Focus Now On Umeme's Stock Market Debut

With Umeme officials declaring that their Initial Public Offering was oversubscribed, attention has now shifted to the anticipated listing of the firm's shares on the Uganda Securities exchange on November 30, where the share price could go up.

Although many brokerage firms and receiving banks say they are still adding up the numbers, Umeme officials estimate that the Shs 171 billion IPO was oversubscribed by at least 35%. Going by precedents, that should create more demand for the stock at the securities exchange, thereby leading to a jump in the price.

"The Umeme Initial Public Offering (IPO), which closed November 7, has been declared overwhelmingly successful, with over 35% over-subscription by enthusiastic investors.

Institutional investors, especially those from Nairobi, are largely responsible for the IPO's strong performance," notes a press statement from Umeme. Shrewd investors might look to selling the shares on the first day of trading to make a killing. This particular form of trading was witnessed during the listing of Stanbic bank shares on the USE in 2007, with the share moving from its IPO price of Shs 70 to Shs 240 on its debut.

However, investors looking to sell off on the first day might want to set a fair price on which to sell. Crested Stocks, one of the brokerage firms that participated in this IPO, feels the fair value of Umeme's share price is Shs 323. More than 622 million shares were on sale. Each share went for Shs 275. The offer, which accounted for 38% of the company, ran for slightly more than three weeks.

According to Patrick Mweheire, the Stanbic bank head of Corporate and Investment Banking, there was huge excitement from the retail segment.

"There were thousands of retail applications in total, which is a good indicator that the IPO was well received by the general public in the three-week offer period. The Ugandan retail segment, institutional investors from Uganda and the rest of East Africa and foreign institutions applied for shares worth more than the Shs 171 billion on offer," he said.

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