Nairobi Securities Exchange kicks off sale of shares to the public

Nairobi, Kenya:  The Nairobi Securities Exchange kicked off the sale of its shares to the public through an initial public offering (IPO). For the first time in the history of the NSE, ownership of the NSE will be open to Kenyans from all walks of life.

The Exchange, which was previously owned and run by its 22 trading participants, is selling 66 million new shares worth Sh9.50 each to the public. 63.5 million shares on offer are reserved for the public. In this tranche, the minimum subscription is 500 shares for Sh4,750. One can apply to buy additional shares in multiples of 100.

2.5 million shares on offer are reserved for current employees of the Exchange. The bourse will be the second African Exchange, after the Johannesburg Stock Exchange (JSE), to demutualise and to self-list.

Authorised agents will receive applications from July 24, 2014 until August 12, 2014. The Nairobi Securities Exchange is expected to self-list on the Main Investment Market Segment (MIMS) on September 9, 2014. For the NSE to qualify to list on MIMS, a minimum of 1,000 shareholders, who are not trading participants or employees of the NSE will need to own the shares. “The Exchange has provided a platform for Kenyans to own Kenya. Now, with the self-listing of the NSE, we are able to walk the talk and encourage every Kenyan to be a part of our journey as we discover opportunity,” the NSE’s chairman, Mr. Eddy Njoroge, noted.

At the moment, the NSE is the only authorised securities exchange in Kenya. But, this could change should the CMA approve more securities exchanges in Kenya. “The NSE is aware of such a possibility so it has continued to build the brand and is putting in place a dynamic strategy to ensure continued competitiveness,” The Exchange noted in its IPO prospectus. Part of the Sh627 million to be raised from the IPO, should the offer be fully subscribed. This will enable the Exchange to repay its mortgage debt and invest in infrastructure for the introduction of products that are new to the market.

The NSE will upgrade the Automated Trading System (ATS). The Bonds Trade Reporting System which is awaiting approval by the Authority thusincreasing transparency in bond trading on the bourse.

The NSE expects to introduce the REITs segment in the market this year to enable people to invest their savings in unit trusts that buy real estate assets. The investor earns a return from the rental and interest income of the properties or mortgages bundled in the unit trusts; there is also an opportunity to earn capital gains when the price of the units rise.

Since the early 1990s, many stock markets began to demutualise by becoming profit rather than non-profit entities and opened ownership to outside investors, Exchanges are responding to the new reality. Additionally, a growing number of exchanges have introduced their shares on the stock markets they operate through a process called self-listing. The motivations for the demutualisation and/or self-listing of stock markets include the need to raise capital to invest in new technology and other infrastructure. Listing also provides an avenue for an exchange to show its commitment to transparency and good corporate governance. It builds investor confidence in the brand of the business as a market operator and helps to fend off competition.