The Safaricom IPO closed on 23rd April 2008, at 3.00 p.m. Initial indications are that the offer will be oversubscribed by at least 200%. This means that the percentage of the offer allocated to foreign investors will drop from the initial 35% to 20% -- that is, 20% of the 25% issued shares that was floated. It also suggests that the 10 billion shares on offer at Kshs. 5/- (or roughly $0.08) per share were far from sufficient to soak up the current, and growing, appetite for good shares at the NSE.
So, if 10 billion shares couldn't do it, how many billions more would have? If the Safaricom IPO couldn't do it, which IPO will? It is not likely that the companies likely to float in the next year or so will be able to match Safaricom. In the pipeline are, among others: Co-op Bank, NSE itself, Nakumatt, Trans-Century and Dyer and Blair.
There is something about the percentage of the Safaricom IPO reserved for foreign investors which just does not make sense, or sound mindful of the local retail investor. Vodafone, a London-based foreign company, already holds (together, and probably corruptly, with the mysterious Mobitelea) 40% of Safaricom. So why reserve another 8.75% to foreign investors! This is not the path to the kind of popular capitalism which Thatcher herself championed (for British nationals) two or so decades ago, and which makes so much sense even in a globalizing world.
I am pleased, however, that Kenyan retail investors voted with their wallets (and common sense) in favour of participation in the IPO and against the call by some misguided politicians who sought to discourage them -- and even threaten them with some vaguely-hinted-at administrative retribution in the future.
We were warned that oversubscription, such as appears to have come to pass, would be dealt with on a pro-rata basis -- with each subscriber in the oversubscribed investor category assured only the first 100 shares. But our opinion was not sought -- and not heard. Many in Nairobi's brokerage and regulatory community have argued, with little or no guilt-conscience, the merits of the pro-rata approach -- and the perceived demerits of the KenGen approach. The truth of the matter is that pro-rata is a code word for favouring the rich; for putting the ordinary investor in his/her place away from the high table. And yet it is the millions of ordinary, pre-paid,
bamba/sambaza customers who have made Safaricom what it has become [I understand that 99% of Safaricom's subscribers are pre-paid].
Since the minimum number of shares an investor was allowed to apply for was 2000, common sense suggests that the pro-rata mechanism should be effected only after the minimum number of 2000 shares has been allocated across the board -- even if that initial allocation exhausts the 10 billion shares available. If it is not possible initially to allocate 2000 shares to each applicant due to the oversubscription, then a smaller number will do -- even if nothing remains for the pro-rata phase.
