I trooped to get my IPO refund today - and it was a bit scary passing some brokerages houses on Kimathi Street which had long lines of people stretching outside the building as they awaited their refunds. But, my stockbroker/bank is about two miles out of town which means the crowd is slightly smaller and I get better, and faster, service.
Every broker has a system for refunds but once I found myself in the right place, I gave in my details and then sat in a cool tent waiting for my number to be called. A waiter tapped everyone on the shoulder offering them a soda to which almost everyone quietly asked “how much?” to which he happily replied “It’s free, one soda each!”.
Despite the speedy service it still took about two hours to get my 0.000033% of the massive IPO refund. Since the volume of applications was unprecedented and the timetable strict, refund cheques were sent from KCB back without being sorted to brokers - who now had to weed out each refund cheque.
good/bad about banks
Generally refunds is easier at the bigger banks who have more space in their halls, more staff on call, and can quickly open new desks and teller windows dedicated to share matters. They are also able to process cheques, but at a fee. My bank offered to cash my cheque for 1,000 shillings (15% of my refund) - but I instead opted to make another long trek to KCB who did it for 200 shillings.
The CMA needs to set some ground rules for future IPO’s including:
- Brokers & institutions must demonstrate they have the capacity (space, competent staff) to handle volumes of new investors. It probably took each working investor an hour to buy Kengen shares and another hour to collect a refund cheque – productive time spent away form the office.
- Have standard fees for bankers cheques, and encashing refund cheques (and also for dividend cheques).
- Review and restrict lending for shares in future.
- Another loophole that needs to be sealed is that an investor can have as many CDS accounts as possible. This means that they can get the maximum IPO allocation (6,600 Kengen shares) several times over.
Banks have greater advantage in terms of offerign financial products. They have a captive audience (stuck in long lines)and are able to sell them other products including mortgage and stockbroking if they chose to. Recently, insurance companies have been asking for financial laws to be changed to enable their products to also be sold at banks.
So where did the money go?
Despite my earlier protestation that any dividend not re-invested is wasted my money is going to go towards day to day expenses, debt repayments and pilsner (I have encountered too many flat Tusker's of late). This is because the refund money is coming in the middle of the month, when most of us are very broke. Also there’s not much else to buy on the NSE with 7,000 shillings, now that Kengen shares already selling for over 30/= - so it's abstinence for now, till the next IPO.