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Co-op Bank directors earn millions from sale of shares

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Co-op Bank managing director Gideon Muriuki. Photo/FILE 

By MICHAEL OMONDI

Posted  Thursday, December 1  2011 at  20:37

Top Co-operative Bank shareholders, including chief executive Gideon Muriuki, have sold portions of their stakes in the first round of major profit-taking since the firm went public through a listing at the Nairobi Securities Exchange (NSE) three years ago.

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Regulatory filings at the NSE show that Mr Muriuki’s stake in the bank dropped to 1.44 per cent at the end of October from 1.95 per cent in December last year.

The move earned Mr Muriuki more than Sh320 million from the 18 million shares he sold. Co-op Bank’s directors, including chairman Stanley Muchiri, who bought millions of shares ahead of the 2008 initial public share offering, also reduced their interest in Co-operative Bank, taking advantage of expiry of the lock in period to harvest their investment.

Mr Muchiri sold 2.7 million shares worth Sh49 million while directors James Kahunjo, Elijah Mbogo and Scholastica Odhiambo sold more than a million shares each to exit the list of the bank’s top 10 shareholders.

Stockbrokers said the bulk of the sales took place between March and May when the stock traded at an average of Sh20 each.

Mr Muriuki and his directors were among Co-op Bank’s top shareholders who the market regulator had barred from selling any stake in the bank for at least a year upon the debut at the NSE.

The Co-op Bank chief executive’s decision to reduce his stake in the firm puts him in step with his Equity Bank counterpart, Mr James Mwangi, who harvested a small part of his investment in the bank during the same period.

“Mr Muriuki’s must be seen purely as a profit- taking move driven by the performance of the share price at the time of sale,” said Mr Johnson Nderi, a research analyst at Suntra Investment Bank.

Co-operative Bank, which sold 19.3 per cent of its issued and paid for shares to the public for Sh9.50, has posted significant gains from a low of Sh6.50 in the first quarter of 2009 to a high of Sh20 in the first quarter of 2010.

On Thursday, the bank traded at Sh12.45, meaning the bear run at the NSE has cost shareholders Sh26.3 billion since the year began.
“Mr Muriuki’s timing was perfect since indications are that he sold early in the year when the share price was at its peak,” said an analyst at Standard Investment Bank who sought anonymity.

Mr Muriuki did not respond to calls and e-mail enquiries from the Business Daily on the matter.

The sale of shares by Co-operative Bank executives and directors is a master stroke in timing coming after their investment appreciated by more than 800 per cent based on the pre IPO price at which they bought.

The listing of the bank at the NSE also ushered Mr Muriuki into the club of paper billionaires, underlining the stock market’s status as the shortest route to riches in Kenya.

The quick change in Co-operative Bank directors’ fortunes is attributed to the share structure re-engineering that took place before the IPO in mid-2008. That move saw each share split 100 times and assigned a nominal value of Sh1 and the directors and employees allowed to buy before it was priced afresh in readiness for the stock market.

The low pricing of Sh9.50 upon its debut at the Nairobi bourse not only offered the share enough headroom to appreciate, but left each of the bank’s board of directors with more than five million shares of the listed lender’s issued stock at the time of the IPO.

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