My shares portfolio has just lost about 10,000 shillings in the form of 500 Uchumi shares. I am comfortable with my loss, because I understood the risks, but I feel bad for others who bought Uchumi shares on my advice, as well as for others who borrowed money to buy Uchumi rights.
Mine is especially painful because I did not buy during the rights issue, but after when it appeared that the re-capitalised company had turned round and was now on the path to recovery. I bought at about 20/=, based largely on the persuasion of the new management and one investment bank report that predicted/priced Uchumi shares at about 33 shillings.
What next?
Investors are looking to the compensation fund for redress, but I don’t see anything coming out of it given that enough information was made available to the public about Uchumi’s precarious position. And to make payment in this case will undermine the entire premise of risk taking on the NSE – Will investors start suing when share prices drop in future?
At the company’s last AGM, long time shareholders turned their wrath on the auditors when they were told that the company’s previous management were basically off the hook for the company’s record losses.
Look Back
All fingers are now pointing to the now discredited expansion strategy of the company. Take a look back at the rosy beginnings of the strategy (in this 2001 interview with the then new MD of Uchumi), which was immediately challenged by a sceptical reader.
Odd point
I have friends who bought Uchumi rights and have spent the last two months trying to cash in their profits at 16, 20, 15 shillings etc. - they hade no warning, premonitions, or tips about Uchumi’s demise, - they just wanted to invest the money elsewhere. At first they were told that Kengen IPO made it difficult for other shares to be traded, and then they were told nothing. Maybe their broker was incompetent, maybe they were not aggressive enough with their broker though they were certainly persistent as they called him almost every other day up till Wednesday May 31 to ask how, with Uchumi trading almost a million shares a day no one bought their shares!
14 comments:
Skwota> Pole Mzee...Following your post on "my stable" i felt like that you were walking down some wrong road...and what speculator haven said BUY MORE dude you must have gotten many guys burnt!!!!
But ijavascript:void(0);
publish this comment feel you i had a pal who had 75k shares!!!!
Pole Bankelele. It seems to be pouring around you lately. the storm will blow over. Hang in there.
I've been comforting major Uchumi victims too. I was wondering if the have a "junk status" for stocks in the NSE? And if so what the protocol for that is.
You win some, you lose some.
Thats what NSE is all about.
@Banks, pole sana. But don't despair, South Africans will bid for Uchumi before you know it. You might salvage some money or even make a profit. I get the feeling that Kirubi has been working in cahoots with South Africans to give them a foothold in Kenya through Uchumi. If you have noticed Kirubi's increasing trips to South Africa of late, he's coming back through the backdoor. Hang in there and good luck.
Disclaimer: This is purely speculative!
I was doing some work for those guys some years back where i saw that most of the people on the board were suppliers to the supermarket and they supplied at some very fantastic rates...
Would not, did not and will not touch Uchumi with a barge pole!
@bankelele
been smarting at my 6,000 loss given that i even bought in the last month!! basically am just happy i hadn't put 75k in dec!!
@m
now that is what i consider 'insider knowledge!' how does the kawaida person like me know that the board are the major suppliers and that they are getting 'fantastic rates'
@anonymous
been hearing the Chris Kirubi/SA story of how he wanted the downfall so as to buy off uchumi cheap!! even before rights issue!
@mimmz
have been wondering too whether to just offload my shares soon. proverbial 'quit while you are ahead'
@bankelele
thanks for your blog again,.....your stable blog had positive influence and for me that was 'diversify' and am glad i have!! keep the information flowing
Anonymous: Thanks. This is bad for Kirubi's image even if he walked out on Uchumi years ago - and media and minister are taking hits at his team & era
Mimmz: Thanks, Have taken 3 hits last month. No formal junk status - just watch for lack of trading activity, no profit/dividend and a bottom share price
Kagz: totally agree
M: Insider relationships are a fact of life, given that they are very few big investors,but as you said, Uchumi was a dangerous mix. Sometimes, it's not good to insist on a board seat
Pole for your loses..
When buying Uchumi during the rights issue, my agenda was to sell at 15 which I did.
I was actually intending to jump back in but only after the years results.
DREAMWEAVER
Very sorry about the loss Banks, but i guess that is what diversification is all about, it cushions the drops in your protfolio, that is if it as well done as yours seems to be.
There are sharks in these waters and they have been feeding well, it is only through a medium like this that the 'small fry' can try to make it on the NSE, so thanks for that too.
As for Kirubi: he is a capitalist plain and simple, but one who seems to be especially selfish, so watch where he goes!!!
Meanwhile guys: read the auditors reports, read the financial pages and dont ignore the cocktail gossip entirely.
banks, thats the game of investments, at times you loose, others you gain. at least you didnt lose much.
our market needs to move from being speculation-based to sound financial and investment analysis of listed companies and this info should be appropriately communicated to prospective investors.
could someone clarify whether the cma's investor compensation fund is meant to compensate investors who loose when a listed company goes down uchumi-style or when a brokerage firm falls shah-munge style?
Pole mzee,
Could Merali have reversed the situation if he got a board seat as he had intended?
banks... about your pals who persistently for the last 2 months tried to get their brokers to sell their Uchumi shares, i'd advise them to consider lodging a claim for negligence against the brokers. i.e. if indeed in 2 months the brokers couldn't sell the shares, while huko NSE reports significant trading of uchumi shares; these guys need to account for the 2 months period- and if they can't they should bear a portion of the investor's loss.
We need to push for reforms in the stock brokerage arena; and make these guys accountable for their actions & ommissions. They can't be gods unto themselves- at our expense!
dropmyload: Remember Merali actualy bought the shares, so he must have seen the books first.
Alpha Quadrant: Good timing
Speculator: It is likely that the Government will defy convention and 'step in' with a political minded solution to rescue Uchumi
jp: I accept, it's a game of win some and lose some, and my loss was small compared to some of the sorry investor tales I have seen in the papers
investornew: He's pretty much said the same thing since Sunday (as appears on your blog)
Omani: It's possible Merali could have reversed the situation, though Mwananchi feels Merali & Kirubi are both shareholder poison
Kibet: I will talk to my pals since they may have a case that qualifies for the investor compensation fund. This is a wake up call, especaily for the CMA and NSE
Apparently Merali offloaded his shares after govt refused to offload KWAL's shares ....
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