When Kenya Airways first applied for its shares to be suspended from trading, it was envisaged that it would be for a period of three months effective from July 3, 2020.
The airline said at the time that the main reason for the decision was to close the shares register to determine who was eligible to be bought out by the government.
A few weeks earlier, the government had sponsored the National Aviation Management Bill 2020, which went through the first reading in the National Assembly on June 30, 2020.
The Bill was the precursor to the planned nationalisation of the airline.
While most listed companies close their books for a day to determine the investors eligible for things like dividends and bonus shares, the Capital Markets Authority (CMA) granted the carrier the suspension of the three-month shares.
The regulator then embarked on a continuous extension of the suspension of the national carrier’s shares from trading even though the original reason for the freeze looked increasingly remote.
In subsequent notices from the Nairobi Securities Exchange (NSE), the additional extensions were described as designed to “enable the company to complete its operational and corporate restructure process.”
Early last year, a Kenya Airways minority investor sued the CMA for allegedly abusing its discretionary powers by maintaining the suspension of the shares despite a lack of evidence that the government buyout was in the works.
The suspension had trapped more than 77,000 small investors who were unable to liquidate all or part of their portfolio until on Monday when the shares resumed trading after the CMA rejected the national carrier’s latest request to maintain the trading ban for another year.
Allan Kilavuka, chief executive, of KQ as the airline is known by its international code, wrote to CMA on December 16, 2024, seeking a 12-month extension of the shares trading suspension.
In justifying the latest request, Mr Kilavuka recounted the issues that helped secure the previous extensions. He told the regulator that KQ faces an imminent receivership, voluntary winding up or statutory management.
There is a significant restructuring involving an acquisition, merger or takeover and a decision has also been made by the directors to have the shares suspended, he added. Finally, KQ is in material default of its listing obligations.
The CMA chief executive Wyckliffe Shamiah responded to Mr Kilavuka on January 2, 2025, saying the KQ boss had not supplied evidence to support the claims.
“There is no evidence to suggest that a decision has been made or is imminent that would place the issuer under statutory management, receivership, liquidation or voluntary winding-up,” Mr Shamiah wrote.
The regulator also noted that the National Aviation Management Bill 2020, which was the main reason for the initial suspension of the stock, has since been withdrawn.
“In light of the above, the Authority hereby declines to extend the suspension of the trading of KQ shares. The said shares will resume trading at the Nairobi Securities Exchange effective January 6, 2025, further to the directive issued to the exchange in its letter dated January 2, 2025 a copy whereof is enclosed herein for your perusal and consideration,” Mr Shamiah wrote.
When contacted for comment, Mr Kilavuka said the extension of the shares freeze was necessary because of the airline’s efforts to raise capital.
“Three aircraft are on the ground because we don’t have spare engines and we don’t have slots at the engine shops. We wanted the suspension extended because of the capital raising … we are working on. That has not been concluded yet,” he said.
The latest metamorphosis of KQ’s proposed solutions is a bid to sell a stake to a strategic investor, a plan that was to be completed by June last year but is yet to materialise.
For minority investors, the resumption of trading in KQ shares offers an opportunity to take out their capital or expand their exposure to the company.
A total of 173,700 shares of the company changed hands yesterday at an average price of Sh4.05, marking a 5.74 percent gain from the last trading price of Sh3.83 on July 2, 2020, when speculators bought 1.83 million shares in anticipation of the government buyout.
Similar speculative trades were seen in the days leading to the suspension of the stock including on June 30, 2020, when 1.32 million shares changed hands at a price of Sh3.28.
KQ, which posted a rare Sh513 million net profit in the half year to June 2024 on the back of lower finance costs, has the National Treasury and 10 Kenyan banks as its top shareholders.
The Treasury has a 48.9 percent stake while the banks including KCB Group and Equity Group have a 38.09 percent ownership which they acquired in 2017 after the carrier defaulted on their loans.
