Negative investor sentiment hurts sale of Fountain stocks

Negative investor sentiment has seen Fountain Enterprise Programme (FEP) Group members offer more shares for sale than those willing to buy the stock.

There are 2.1 million FEP shares currently on offer at the over-the-counter platform but no takers, with only 145,173 stocks having traded in eight lots since sale of the shares begun in January.

The share price opened at Sh15 a piece in the first trade recorded in February, touched a high of Sh25 in April and cooled off to Sh23 in the last executed order dated May.

FEP chief executive Maurice Korir attributed the mountain of outstanding offers to the headwinds facing the investment group such as corporate governance and financial performance.

“There are more sellers than buyers. This is due to the challenges we’re facing mainly reputation, investor confidence, and working capital,” he said. “We are addressing these concerns.”

FEP’s portfolio was worth Sh4.4 billion as at December 2015, with interests spread across real estate, finance, security services, hospitality, technology, education, and retail.

The outstanding shares on sale have been priced at between Sh15 apiece and Sh100, with the wide disparity indicating that the stock is still in price discovery mode.

The average volume-weighted price for the FEP shares traded to date is Sh19.50, according to data from Standard Investment Bank.

These unsettled stocks are in 14 lots, with the biggest being 991,808 shares on offer at the market price, with the smallest lot being 600 shares at Sh60 each.

READ: Fountain Enterprise pursues 6 officials for stolen millions

Licence

FEP was in the red to the tune of Sh905.7 million as at December 2015, compared to a net loss of Sh1.4 billion a year earlier. Its two attempts to enter the banking industry suffered a blow after the Central Bank of Kenya rejected FEP’s takeover of Credit Bank and denied the investment group a licence to operate a deposit-taking microfinance bank.

FEP has also revealed that it has hired an asset recovery agent to pursue six former senior managers and confiscate Sh67 million they allegedly stole.

There have also been delays in completing key projects such as the 146-key Suntec Hotel under construction in Sagana, due to lack of cash.

The facility needs a further Sh900 million to complete having already gobbled up Sh686 million.

Sources told the Business Daily that the recently concluded rights issue was “massively undersubscribed.”