An introduction entails listing of shares already issued.
According to Odundo, listing by way of introduction gives the share price discovery and also gives existing shareholders an opportunity to exit and new investors to buy the stock.
“Once listed it is easier to do an IPO due to fewer compliance conditions,” he says.
Last year’s British American offer, the first IPO in three years, failed to excite the market and registered a massive under-subscription.
British American Investment Company, the holding company of British-American Insurance Company (Kenya) Ltd, British-American Asset Managers Ltd and Britam Insurance Company (Uganda) Ltd received approval from the Capital Markets Authority (CMA) to raise the funds by floating 650 million new ordinary shares.
But investors bought only 60 per cent of the shares with foreign investors shunning the stock.
The company was seeking Sh5.85 billion to fund expansion in east Africa, including South Sudan, but only raised Sh3.5 billion due to risk aversion in global markets given the eurozone crisis and a sluggish US economy.
“I think what has happened is to do with market conditions and cost of funds,” says George Bodo, lead analyst at Callstreet Research and Analytics Company.
“Over the last four years the economy has not been doing well and this means investors have been short of disposable income to invest in stocks.”
According to Bodo, an IPO is a very hectic venture, so some companies prefer to list by introduction, which offers plenty of incentives.
“I think we will see a lot of listing by introduction going forward. Listing by introduction means you are not introducing new shares but you want to unlock the value of the company.”
Among benefits of listing include arising the company’s public profile and preferential corporate tax treatment.
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