Capital Markets

Airtel Uganda sweetens IPO with free shares offer


An Airtel Money kiosk operating at Westlands as pictured on March 22, 2023. PHOTO | FRANCIS NDERITU | NMG

Airtel Uganda will offer free shares to investors participating in its Sh31.3 billion initial public offer (IPO) which opened on Wednesday, in an effort to spur uptake of the shares.

The offer, which has been opened to Kenyan investors, will see the incentive shares issued to qualifying investors on a pro-rated basis, with higher application volumes guaranteeing one more free share.

Retail investors in the IPO will receive between five and 20 free shares per 100 bought, while professional investors will access between 10 and 37.5 units per 100 purchased.

Read: Investors eye high dividends in Airtel Uganda IPO listing

The incentive shares effectively represent a discount on the purchase price, which has been set at USh100 (Sh3.91) per share. The firm is floating eight billion shares in the IPO.

Retail buyers who apply for between 2,500 and 18.5 million shares will have five incentive shares per 100 applied for.

Those applying for between 18.5 million and 37 million units will receive 10 shares per 100, while applications above the 37 million mark will attract 20 free units per 100.

For professional investors, the minimum threshold to qualify for free shares is 40 million units. Applications of between 40 million and 200 million shares will be incentivised by 10 free units per 100, while those seeking between 200 million and 400 million shares are getting 15 free units.

The incentive shares rise to 15 per 100 for applications of between 400 million and 2.85 billion shares, and 37.5 per 100 for applications above the 2.85 billion threshold.

The move by Airtel Uganda to offer the incentive shares mirrors that of fellow telco MTN Uganda, which gave successful applicants in its 2021 IPO between five and 10 units for every 100 units allocated.

“As part of the offer, the selling shareholder will allocate and transfer incentive shares to all qualifying applicants at nil cost in an effort to broaden Ugandan shareholding,” said Airtel Uganda in a prospectus on the IPO, whose offer period ends on October 13.

“For the avoidance of doubt, allocated incentive shares form part of the offer shares, and allocated incentive shares correspondingly reduce the offer shares available for allocation.”

While not common in Kenyan IPOs, the issuance of free shares during a sale is meant to incentivise prospective investors to participate and also to encourage higher ticket applications through the pro-rated allocation of such shares.

Airtel Uganda has also disclosed its allocation formula, which will prioritise Ugandan retail investors and employees ahead of the other classes of applicants in the IPO.

Read: State frees Airtel, tech giants from 30pc local stake sale

The second priority will go to Ugandan professional investors, followed by EAC partner states—which include Kenya— and foreign investors, in that order.

There are no allocation quotas, however, meaning that Kenyan investors are not capped on the number of shares they can take up in the IPO.

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