By James Anyanzwa
The rush by firms to debut at the Nairobi Securities Exchange through initial public offerings (IPOs) is losing steam.
Instead most companies now opt to list by a way of introduction thus avoiding exorbitant costs associated with IPOs and the rigorous due diligence process.
In the last three years, only one firm — British American Investment Company — has listed at the bourse through an IPO compared to seven between 2006 and 2008. “It is because of a declining market that we have not had many IPOs,” said James Wangunyu, Standard Investment Bank executive chairman.
In 2006, KenGen IPO was over-subscribed by 337 per cent, opening the floodgates for other listings before IPOs lost appeal in 2008.
ScanGroup was oversubscribed by 520 per cent, Eveready East Africa (800 per cent), Kenya Re (334 per cent), AccessKenya (300 per cent) and Safaricom (382 per cent).
However, the last two IPOs — Co-operative Bank (2008) and British American (2011) — ended in under-subscription.
However, Wangunyu is upbeat that the bourse is on the recovery path.
“The market has been bearish in the last three years but is now recovering and we are seeing a number of firms considering IPOs,” he said.
The performance of Co-operative Bank and British American IPOs was blamed on foreign investors pulling out of emerging markets due to the global financial crisis, and retail investors who had borrowed from banks to invest in shares fled the market after burning their fingers.
Easy exit
“The market has not been favourable for IPOs. A company can’t plan an IPO if it is not sure it will be a success,” said Geoffrey Odundo, Kingdom Securities managing director.
