Dar es Salaam — Vodacom is reportedly considering an extension of the deadline for the sale of its shares to the public, amid reports the initial public offering (IPO) may be undersubscribed.
Bloomberg reported yesterday that the company would ask the Capital Markets and Securities Authority (CMSA) to extend the IPO deadline and also allow foreigners to buy the shares.
The agency quoted Fortius Rutabingwa of Orbit Securities, who are the lead brokers in the IPO, as confirming the undersubscription.
A request is being considered because the uptake of shares is "still below target," said Mr Rutabingwa, head of market research at Orbit Securities. He spoke to Bloomberg by phone Thursday in Dar es Salaam.
Vodacom managing director Ian Ferrao was last week quoted in The Citizen saying the response to the IPO was good. He did not, however, state how much of the proceeds had been netted as the April 19 deadline approaches.
Vodacom Tanzania is selling a total of 560 million shares at a price of Sh850 each in the ongoing IPO, the largest in the country's share sale history. The IPO, which opened on March 9, was expected to raise a whopping Sh476 billion.
On Wednesday, the company's officials held talks with lawmakers in Dodoma with a view to seek the IPO extension. Bloomberg quoted Kigoma Urban MP Zitto Kabwe as confirming that Parliament had asked the regulator to extend the deadline to allow people more time to buy shares.
According to Mr Rutabingwa, one of the reasons an extension may be requested "is because the IPO is under-subscribed." "The other reason to extend is to allow East Africans to take part," Rutabingwa told Bloomberg. The law in Tanzania does not allow direct share sale to foreigners, who may, however, participate once they are floated at the Dar es Salaam Stock Exchange (DSE). Vodacom is expected to boost the DSE's market capitalisation by at least 2.4 per cent to about Sh20.7 trillion, according to data on the bourse's website.
"A failed Vodacom IPO would raise serious questions regarding the viability of the Tanzanian capital markets as a source of equity capital and dent the government's hope of broad-based economic empowerment of its people through ownership of its leading enterprises," said Bertram Eyakuze, an independent financial analyst in Dar es Salaam. "More generally, the country's image as an investment destination would suffer a significant setback."
Core Securities, a Dar es Salaam-based brokerage, so far only has commitments to buy Sh100 billion in shares, out of the Sh200 billion it targeted, Core chief executive officer George Fumbuka told Bloomberg. While CMSA is optimistic that domestic investors will absorb all of the shares, it may consider opening up the offer to foreigners if it's under-subscribed, spokesman Charles Shirima said last month.
"We are still optimistic that the target will be met by the deadline," Mr Shirima said by phone on Thursday. "Because we haven't yet received the report from the lead adviser, we can't say what is the position of the IPO." Vodacom is listing because the government requires all telecommunications companies in the country to sell at least a 25 per cent stake on the DSE to boost domestic ownership.
The company expects demand for the shares to increase in the remaining days of the offer, Ms Rosalynn Mworia, head of corporate affairs at Vodacom Tanzania, told Bloomberg.
"We have witnessed increased interest and applications over the past few days which we hope will see to a successful close of Vodacom's IPO," she said.