By John Oyuke
UAP Holdings Ltd shareholders and investors now have a platform to trade in shares they bought during the recent public offering while awaiting formal listing at the Nairobi Securities (NSE) within 12 to 18 months.
The new shares commenced trading on the Over the Counter (OTC) Market yesterday providing them with liquidity, following the public offer that registered a subscription level of 130 per cent in December.
Also known as “unlisted stock”, trading, these securities is done directly between two parties, without any supervision of an exchange – by brokers and dealers who negotiate through phone or the Internet.
However, the regulator (Capital Markets Authority) monitors transactions to avoid illegal activity or stock price manipulation.
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Though investors are given this temporary window to trade their newly acquired shares, sceptics, however, say this market has the disadvantage due to lack of transparency and control besides the risk of locking in investors until when the new shares are listed.
There is also no authorised body to approve the traded products or limit the positions taken while unlike formal exchange there is no clearing house to guarantee the transactions and thus eliminate credit risk.
Transaction advisers Genghis Capital and CFC Stanbic Financial Services will host the UAP Insurance shares listed at OTC. Edgar Wamalwa, Head - Research and Corporate Finance, Genghis Capital Ltd, said the OTC market has been set up to provide liquidity before listing of the shares at the NSE within one and one and a half years.
He said the OTC trading rules, as outlined in the Public Offer prospectus, have been developed to ensure liquidity, transparency and equity is provided to UAP Holdings Ltd shareholders and investors.
“The rules have been drawn to mirror the best practices of the NSE and other exchanges,” Wamalwa told investors during the launch of OTC Market for UAP shares in Nairobi.
In addition, he said, daily price movement for the security in a single trading session shall not be more than 10 per cent of the previous day security price except if UAP announces its financial results or material information.
“In such an event, UAP Holdings will relay this information directly to all market intermediaries and the media,” said Wamalwa.
Share liquidity
Speaking at the launch, Group Chairman Dr Joe Wanjui said the trading of the new shares would provide investors in UAP with liquidity of their shares following the successful conclusion of UAP’s public offer.
“We are very excited to offer investors in UAP and the general public liquidity in their shares and a trading platform in advance of the planned listing of shares on the Nairobi Securities Exchange,” he said.
“We believe the OTC market will provide an efficient price discovery mechanism and opportunity for the general public to acquire shares in UAP,” he added. The pan-African Financial Services Group which had floated 12.5 million shares at an offer price of Sh60 per share received applications for 16,198,500 shares, raising Sh971 million against a target of Sh750 million.
Group Managing Director, UAP Holdings Ltd, Dominic Kiarie said the proceeds together with the Sh4.6 billion earlier raised in June last year from Private Equity investors brings the total amount to Sh5.4 billion.
He said the funds realised from the market would support the Group’s pan-African expansion strategy, strengthen balance sheet of its existing businesses and support the execution of real estate strategy.
“This will assist in diversifying our businesses across key geographical markets and segments and deliver sustained and strong growth in earnings,” said Kiarie.
