- Stability: Many investors (retailers as well as institutionals) have in past IPOs tended to liquidate some of their holdings and use the receipts for IPOs. This adversely impacts many counters causing the NSE index to fall. By giving this special dispensation to QII, it will allow them to in effect give some stability to NSE index during the IPO period. What about those counters with little institutional support? There are probably weak on fundamentals anyway...
- Speculation: IPOs have been dominated by speculators who chasing the immediate post-IPO uplift in the price will withdraw savings, borrow and sell everything including their priced bulls to participate in IPOs. This has negative impact on the wider financial system and is compounded by effect of delayed refunds. Most of the immediate post-IPO uplift has come from QII and others going into the secondary to pick up shares. By apportioning an amount of the IPO shares to QII, the secondary market will become thinner thus lowering the immediate uplift from IPOs. This will act to discourage speculators.
- Shareholder expense: Thanks to the free-for-all IPO system, KenGen held its last AGM at Kasarani Stadium and spent ksh80m on the various costs involved (printing and sending annual reports, dividend checks etc). This is not clever business. Moreover, having too many retail investors will accentuate any periods of volatility.
Finally, (and I am not in NSE's pay), MPs like journalists often refuse to let a good story get in the way of facts. Such is the case with yesterday's question time. James Mwangi (Equity's CEO) has never denied he worked for Trade Bank (its in Equity's annual report); unless he owns shares through his fellow directors, its not possible for him to hold 30% in Equity; Trade Bank was mentioned in relation to Goldenberg, as was Barclays, Stan Chart and others. As to people around Jimnah Mbaru owning 90% of the NSE, even a perusal on Hasinet's excellent company info will show you this is unlikely.
8 comments:
It's a good thing the government decided to use the allocation method. but by favouring the Insitutional investors don't you think they are creating a market for only the big and the mighty. I don't see the difference between that and imposition of trade tarrifs by the government. the NSE should be a 'free market' and not a 'fair market' for the rich and might.
on Mr. James Mwangi, the allegations against him are a bit too wild. it sounds to me as if someone is out to blackmail him and the bank. most probably its the multinationals. but we can't dismiss it all as non-sense, can we?
I support the preferential treatment of institutional investors as this reduces the volatility in the market and makes it attractive for large investors to invest in the stock markets.
KaInvestor-retailers still get 47% of the 240m shares be offloaded. Plse note that in most stock markets, retailers rarely get a bite of the IPO. Its good to have speculators, but for the reasons I have listed, its prudent to get a balance so that the market stabilises.
On Equity, I have seen the email from "SK Patel" which Bonny Khalwale tabled, it contains several outright lies. David Ndii was never on Equity's BoD-just take a look at current and past annual reports. James Mwangi wasn't adversely mentioned in Goldenberg (list of recipients-http://www.jaluo.com/goldenberg/Recipientsofgoldenberg.pdf). As a shareholder, I hope Equity put out a statment asap on the issue. As a Kenyan-if its not true, its not right.
I think the restriction on the retailers will limit volatility in the market but doesnt this create an even larger imbalance in the financial system, the large investors will benefit hugely.
On the Equity issue, SK Patel makes serious accusations which im sure will be deemed as ridiculous but is there smoke without fire?
albeit some perform well, majority of our politicians thrive on romour mongering and miserably fail on their core duties i.e. quality parlimentary representation no wonder lack of quorum is the order of the day. making such unsubstantiated claims with little evidence as the m.p did goes to show how insensitive he is. but can we blame him? i think its a mirror of the impunitness and carelessness associated with many of those in power.
Jackie-Retailers still have 47% of the IPO. Re Equity, that is why I would rather those that have hidden the so-called evidence over the last 15 yrs since Trade Bank collapsed come out and lay it on the table. Otherwise...
JM-we pay these guys Ksh500k per month and this is what they come out with.
Tony - 47% with restriction, I personally think the proposals are not a fair practise.
Equity issue - the share price's already falling following negative publicity.
John, Im not sure if its a matter of insensitivity. I think the politicians have these priviledges and may sometimes abuse them. The MPs may have hidden agendas but I if it's in the public's interest then it has to be raised.
Jackie-Re IPOs,its probably is unfair.
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