Wednesday, April 02, 2008

A short history of Kenyan IPOs: Lessons and reminiscences

KCB: Listing price Ksh20 in 1988. Suffice to say that if you were shareholder in 1988,you most likely would have lost your hair but made good evenutally as the stock is KSh24 (after many rights, additional divestures and spilts). Was the 1st GoK privatisation.
NBK: Listing price Ksh10 in 1994. Even with a 2nd GoK divesture in 1996, has posted 400% returns for IPO investors despite its dismal perfomance profits-wise. Thanks Jimnah.
Kenya Airways: Listing price Ksh11.25 in 1996. Its IPO was the Safaricom of its day and has salutary lessons for us all. Its listing in 1996 saw 110,000 new investors (was a huge number in those days) and was the first by an African Airline. Within no time and helped by Goldenberg, drought and moi-economics, the economy was in ICU. KQ's shares went down to KSh6 andwere stuck there for a spell. Investors slashed their wrists and vowed never again until KenGen IPO came along.
KenGen: Listing price Ksh11.90 in 2006. This IPO ushered the new era of NSE complete with CDSC accounts, investors increasing to 500k+ and was the first IPO I took part in. Perhaps due to the absence of IPOs for along-time, lessons were learned by all
                
                  
*Don't make IPO a free-for-all, you'll end up high investor expenses from annual reports, AGMs and                     the like
                   *Share price will stagnate due to liquidity glut
                  * Do price it low
                  *Every investor will see profits and jump, cue oversubscriptions and interest-rate earning for brokers


ScanGroup: Listing price Ksh10.45  in 2006. With lessons learned, guys jumped and made a mint (some 300%). The share still has way too many investors. I have cashed out after getting frustrated about the stagnant price.
Everready: Listing price Ksh9.50 in 2006. A lemon among the recent IPOs. And most knowledgeable investors new it before it listed and thus went in for speculative purposes. Its high lasted a month before plummeting below IPO price where it has refused to come away from. I sold at around KSh18 for one my cdsc account and was flat on another due to lax broker nonsense.
Access Kenya: Listing price Ksh10 in 2007. Although I've made more money from others, this one I am enjoying because it has something of a schedenfraude about it. Firstly, many trashed it on the basis of the forthcoming fibre optic and Telkom's takeover by French Telecom. Secondly, the upside is so huge that I won't be surprised if it reaches mid 30s by next year. Beyond that, it's all about how well it adapts to increased competition, but I am sure it will.
Kenya Re: Listing price Ksh9.50 in 2007. Companies were now wise to the ways of retail investors and restricted their participation. This has ensured that the upside seen in the share has stayed as institutional investors are long-term. But will that last if KRe doesn't change its pre-IPO ways and given this Jan/Feb claims? I am still holding a small portion though I may dispose once I get a dividend for 2007.
Safaricom: Listing price Ksh5.00 in 2008. I hope many can see a pattern emerging in all the preceding IPOs. So judge Safcom as you'd any other share. That way, you'll invest on the basis of its fundamentals which will either look strong or weak. If you think it's strong, why buy for speculative purposes only to go for it later when it might have doubled in value? If you think its weak, then you better review your exit strategy once you know the allocations and especially for the QII and foreign investors. As well as the cabinet composition. If either or both has  massively oversubscribed
and cabinet is kosher, you are in the money . And out of the money if v.v.

8 comments:

Concept said...

From the prospectus Safaricom is only guranteing an allocation of shares. And if the fund managers and pension groups get full allocation where will the demand come from in the secondary trading.

Ssembonge said...

I think I participated in the 1994-96 offerings of KQ, NBK and KCB. I still have the shares to date.

I don't think there were over-subscriptions back then cause I don't recall anything to do with refunds.

coldtusker said...

Concept - The institutions were favored over the Kenyan retail market. This is wrong but hey, this is Kenya!

Wilf said...

I could not see your contact us page. If you are interested in joining the Africa Diaspora Investment Network (www.diasporainvestment.com) formed by a group of West Africans with a similar purpose like yourselves, please drop me a line at howson.services (at) gmail dot com.

Luis said...

I would be interested in joining your investment club. What steps could I take to do so?

Thanks,

Luis

MainaT said...

Concept-you can take this to the bank along with your Safcom profits, ll the local categories will be massively over-subscribed. While the two ppolitical reprobates continue to squabble, the foreign category may need local assistance to be oversubscribed. This will be revealed 2morro btw.

MainaT said...

Ssem-I think KQ was oversubd.
CT-NSE maybe going JSE-way in the long-term i.e. no retail investors.

MainaT said...

Wilf-Tried the website, but i need a log-in. I'll be in touch.
Luis-we are UK-based