The Treasury will create additional Kenya Pipeline Company (KPC) shares as it seeks to raise Sh100 billion through an initial public offering (IPO) and broaden ownership via affordable stocks.
It wants to borrow from the Safaricom script, whose IPO was priced at Sh5 per share after creation of new shares that saw the State offer 10 billion units for sale that attracted Sh236 billion worth of applications against a target of Sh50 billion.
The government is considering issuing new KPC shares in addition to selling its own stake to deepen investor participation.
The Treasury said it would amend the memorandum and articles of association to allow the issuance of new KPC shares during its planned IPO.
The Exchequer says the move will increase the public float of available KPC shares, enabling a broader ownership of the company’s stock among investors, especially retail buyers.
The State is currently fighting back against a suit challenging the privatisation of KPC, where the Treasury Cabinet Secretary John Mbadi has insisted that the process has been above board, including satisfactory disclosures of information and public participation.
The Consumer Federation of Kenya (Cofek) petitioned the High Court to halt the privatisation process, saying the government breached provisions on transparency, public participation and parliamentary oversight.
“As part of the public offering of shares process, the company may issue new shares in addition to, or instead of, offering existing government-owned shares,” the National Treasury said about the proposed amendment of KPC’s governing documents.
“The issuance of new shares serves several critical purposes…enhances liquidity of the stock post-listing by creating a sufficiently large public shareholding and allows for public participation without immediately diluting the government’s existing stake below a strategic threshold.”
The National Treasury will sell a stake of up to 65 percent in KPC as it seeks to raise Sh149 billion from the privatisation of State enterprises.
The company, together with Safaricom, is the only big-ticket firm that could help the State meet its target of raising billions of shillings in a fiscal year when the State avoided new taxes in the Finance Bill.
The capital markets regulator is forecasting that the sale of KPC shares via the Nairobi Securities Exchange will fuel an estimated half a trillion shillings gain in the market value of the bourse.
The Capital Markets Authority (CMA) wants the state to preserve up to 30 percent of the Kenya Pipeline shares on offer to retail investors.
“Propose to consider full allocation of retail investors or set a quota for retail, eg 10-30 percent to encourage small investors to come to market, given they create market activity due to their speculative behaviour,” Wyckliffe Shamiah, CMA chief executive, told two parliamentary committees.
“A well-structured IPO of the KPC magnitude will ensure significant local and retail investor participation- especially targeting ‘hustlers’ and ordinary Kenyans, hence supporting broad distribution of wealth and bolstering public confidence.”
