Wednesday, May 03, 2006

Where will the money go?

Over 18 billion shillings will soon be refunded to investors who will not receive the full amount of Kengen shares they applied for.

These include instituional investors and thousands of applicants who pooled in their savings, sold assets, or took loans from bank, employers, cooperative societies and informal financial groups. (Other Nairumoured would-be investors include a couple of MP’s who sat in a restaurant one night plotting how they would each buy a few million shillings worth of Kengen shares and one of Kenya Airways top 10 shareholders who cashed in most of his high-flying shares to repeat the process afresh with Kengen).

Where will the money go? Will banks call in their money or will some investors choose to repay their loans? With t-bills at about 7%, leaving the money in the bank will not earn enough to repay the loans. Will spurned investors continue buy Kengen share at the market rate after May 19 whether it's 10 shillings or 20 shillings per share? A quality share that trades at 12 shillings. is a rare thing in Kenya. Will they buy other similarly priced shares or take the refund and buy matatu's or real estate? Brokers would love for the money to be used to buy other shares and the stock market could receive a significant boost. Or will they wait for the next IPO, probably in a few months time?

5 comments:

The.Hanyeé said...

My bet is that - with the stock market and IPOs being hot - a good proportion of investors will either seek out other "quality" shares to invest in OR wait for the next IPO. Especially the latter if there's another IPO sooner rather than later.

Talking about which, who else is lined up for an IPO in the near future? I know Scanad, Telkom (I think)...nani mwingine?

meth2k said...

Only time will tell...
For sure there'll be many a disappointed investor (for instance they guy who bought 100,000 shares only to be alloted 4000) but the kengen share is still the most viable security and this means people will still buy from the secondary market resulting in a price increase, at least in the short term.
As it stands, bank loans have already began earning interest so even when the money is returned to the financier the borrower will still need to cough up the interest earned over the period.

...we'll have to wait n see.

bankelele said...

Hanyeé: Wise to wait for next IPO, but interest is already running for many who borrowed money to buy shares - so they may opt for other shares.

meth2k: I now hear full allocations will be up to 5,000 shares, but that may change.

ryan said...

I think it's great that the gov't limited the share allocation to 5000 shares per investor - even for institutions. This way more people stand to benefit more directly from the privatization.

The refund is huge. Nearly 4% of the NSE's market cap. I expect much of it will find its way back into the market.

Much of it will probably go to Kengen as institutions try to build a stake, but I think KQ still shows value in spite of its run-up. Quality company with good growth prospects. Thoughts?

pesa tu said...

Yes, some speculators r already in the market. Notice how HFCK has jumped( not withstanding the new MD and possivle new majority owner).

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