Sunday, March 04, 2007

10 shilling shares

The recent surge of share splits was unjustified based on the overall trading history of the companies. So it’s only a matter of time before some of these shares dip to their pre-split / hype prices. Any share that was trading for less than 100 shillings in the last 18 months is a candidate for correction – to the below 10 shillings mark and that includes CMC, ICDCI, and Sasini.

Now that a few IPO’s have passed, but not their euphoria, it is apparent that investment advisors of future IPO's will have to rework their calculations to satisfy institutional and seasoned retail investors. While government divestment offers will be geared to the mwananchi, smaller private companies will have to ask themselves if by offering IPO shares at about 10/= each, they want to be like Eveready or Scangroup and end up with up with 100,000 shareholders who own 100 – 200 shares each.

Rising shareholder costs
- Kengen told us their 2006 annaul general meeting (AGM) - after the IPO would 80 million shillings and another post IPO company Firestone will have their AGM in Nakuru on March 22 (where fewer shareholders can attend).
- With over 175,000 new shareholders, the cost to Eveready of even inviting all their new owners to the AGM is quite prohibitive - mailing out accounts & AGM notices would cost about 4 million shillings ($63,500) [i.e. 175,000 letters X 25 shillings postage per letter]. So Firestone shareholders will also be asked to approve a change in company articles to allow such notices to be sent by e-mail or fax.
- The same postage costs will apply when Eveready mail out their dividend cheques. Since most shareholders have the minimum 100 shares, they will receive payment cheques of Kshs 60. which is hardly justified when you factor in bank & postage charges
- Also to cut costs, the company has sent out slimmed down accounts that are about the size of the president's speech on Jamhuri day.
- On a positive note, Kengen have made an arrangement with (their bankers) KCB so that shareholders can cash their Kengen dividend cheques at any KCB branch at no cost.

Alternative investments
KTN had a story on Friday about the Central Bank (CBK) crackdown on pyramid schemes - and it was followed by a poll on whether they should be banned. The result was 16% YES, 84% NO (i.e. they should not be banned.) Though unscientific, you sense from the poll that these schemes have become lifelines/shortcuts to riches for a diverse variety of Kenyans.

In fact many of these schemes have been shut down at the urging of commercial banks – who have had to deal with swelling crowds in their banking halls – either depositing or receiving cash in the merry go rounds. Some of these investors blame jealousy from banks (who want to hold their money and give out as loans) and the Nairobi stock exchange for putting pressure on the CBK to act (since they have been selling shares to re-invest in these quick cash back avenues with guaranteed returns.


alexcia said...

I am staying well clear of the stock market until sanity returns.

I would rather go shopping (a bird in hand is worth 2 in the bush) than worry my small mind with the shenanigans of these money types.

BTW what is going on with the world market? Jitters all around

The Alpha Quadrant said...

The NSE i think is undergoing a correction. I can't call it a bear market just yet.

But there are a good number of well priced stocks out there. I wish I had more money to buy more of these.

Pyramid schemes & ponzi schemes:
There's no wealth being created (that I know of).
That should be basis enough for them to be banned. (Actually they are illegal - or were made illegal a while ago)
Money is just being moved from one person to another. No exchange of goods and services that I know of.
Can't invest in such knowing in as much as I may get 10% etc regularly, this 10% comes from another person's funds.

I have friends who lost quite a bit of money about 1-2 years ago from a similar scheme.

Anonymous said...

hi bankelele
i think i am addicted to ur blog, anyway these pyramid schemes are gold for those that are running them but ultimately the common mwananchi loses. The key is to get in at the beginning and and cash in early ana leave the slow ones to suffer

Ruheni said...

Alexcia, the world markets as you put them are in jitters. Unlike the NSE, most investors are looking at facts and fundamentals. At the NSE there are many gold diggers - my grandma also talks of selling a piece of her land and buy shares! - Many think you put in money and get 20+ as returns (don't we all hope to?). One other aspect that plays a role in the world market are NEWs! the bubble bursts in China and all relevant markets go scrambling. If at the NSE news played a big role, this year would be a down path for the Market. Most stocks at the NSE are hyped, so did most markets in the western world in the year 2000 when the internet (new economy) bubble blast. I lost money at the the DAX (frankfurt stock exchange)then. Well the Ponzis and likes will continue, as long as those wanting to make a first buck with almost no information are still aroung - and we have many especially in the shags!

Anonymous said...

i was right last year on ur blog about safaricoms killer app - mpesa

bankelele said...

walexcia: Still invested in NSE, but lying low like a share certificate. no trading till dividend window closes

Alpha Quadrant: Certainly the market is good for insitutional & wealthy investors now. For any Kenyan working abroad (esp. the US) , shares are a bargain - Barclays at $1, Breweries at $2.
- as for schemes, it's like gambling or religion. once you're hooked, more money goes

cindy: there are certain savvy scheme investors I know who are experts and know all the new schemes before the masses, invest, reap the great returns and pull out while while others are now discovering & pouring theri money in. They are never caught in a crash as they have moved on to the next new thing. so insider information counts - even in the world of schemes

Ruheni: Interesting to see how Asian market swings set the tone for Europe & the US. As for NSE shares dipping, it's a good thing as investors need to know that there are risks

Anonymous: get a name, so you can get the credit

propaganda said...

Ha, ha! Anonymous is trying to get credit for reading about M-Pesa in The Standard last October. That's rich.

Sanlihp said...

Hi Bankelele,

please email at I send something I need ur review.Its not marketing at all.


pesa tu said...

Anon has the right remedy for pyramid schemes-get in first ,get out quick.
Pyramid schemes are some of the reasons GVt. exists to protectt the citizens from their stupidity

Anonymous said...

bankelele please contact me on ( i have a proposition about your blogging. i hope you post outta nairobi. may b we can set up a consultancy thingee
please drop me a line.

Anonymous said...


Am a great believer in any investment that gives me more than the traditional rates. . .Thats y i wonder why schemes should they be banned? I have never been coerced to invest in any of them. I made my own decision! I knew there were risks....Now am rich! and young. I took a risk. could i have lost? YES! Could i have won? YES! Did i lose? NO. I took a chance and am proud of it. Make a decision, take a calculated risk and dont look back. Dont put all your eggs in one basket.

Thank you.


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