Slow trading of KQ rights turns focus on shareholders

Less than one per cent of the 1.4 billion Kenya Airways’ rights shares were traded at the Nairobi Securities Exchange (NSE), tying success of the cash call to uptake by shareholders of the national carrier.

Trading of the airline’s rights closed on Wednesday, with 11.8 million shares (about 0.8 per cent of total) transacted over the two weeks.

Figures of shares traded at the Uganda and Tanzanian stock markets were not immediately available.

The focus now shifts to existing shareholders to help the airline raise the targeted Sh20.6 billion.

Equity dealers reported that demand for the rights, whose price held steady at five cents, remained depressed on the last day of trade even as supply shot up to 27 million shares.

The closure means that the success of the cash call now lies with the shareholders, who have until April 27 to take up their allocation of shares in a rights issue, which market players largely expect to meet the target amount.

“There is a huge supply of rights today (Wednesday) unlike the past days but demand has remained minimal as usual,” said Rina Karina-Hicks, the head of trading at Faida Investment Bank.

The rights have held at a steady price of five cents premium above the Sh14 offer price since the issue opened on April 3, amid low supply and demand especially from local investors.

KQ’s share price on the securities market has widely remained below the rights price- a situation analysts say could have dampened demand for the rights, which are expected to list in June.

Eric Malachi, an equities dealer at Kingdom Securities, said that most investors were finding it more attractive to buy the shares because they would trade in them immediately rather than the rights, which in any case were costlier.

“Demand for the rights was dampened because the share price fell below the offer price for the rights, but we expect most shareholders will take up their allocations in full,” said Mr Malachi.

He added that most of the rights taken up on Wednesday occurred in block transactions by big investors, revealing low retail investor interest in the issue that offered shareholders the right to buy 16 shares for every five held.

Stockbrokers in Uganda and Tanzania anticipate strong uptake that will eventually lift the issue.

“We expect that most shareholders will take up their rights towards the closure of the offer window,” said Amish Gupta, a director at Standard Investment Bank.