The share price of Kenya Airways (KQ) has doubled in eight days after the lifting of its trading suspension, handing shareholders a gain of Sh21.4 billion in the wealth they hold in the company.
The airline’s share returned to trading at the Nairobi Securities Exchange (NSE) on January 6 at the pre-suspension price of Sh3.83 a share. It has been one of the daily top gainers in the period since then, closing at Sh7.60 per unit on Wednesday.
Investors have traded a total of 3.4 million shares worth Sh17.63 million of the company in the period since its return. KQ has a total of 5.68 billion shares trading at the NSE.
As a result, KQ’s market capitalisation —the measure of investor wealth— has now climbed to Sh43.18 billion, up from Sh21.76 billion upon resumption of trading.
This makes KQ the 11th largest listed firm by market capitalisation at the NSE, even though it continues to trade under a negative equity position.
KQ had remained suspended from trading at the NSE for four and a half years (since July 2020), locking in more than 77,000 retail investors on the counter ahead of what was expected to be a quick buyout by the government in a nationalisation plan.
The airline’s biggest shareholder is the Treasury with a stake of 48.9 percent, worth Sh21.1 billion at yesterday’s price. A group of 10 local banks which agreed to convert debt to equity in 2017 holds a 38.09 percent stake, whose value stood at Sh16.4 billion on Wednesday.
The nationalisation plan was based on the Kenya Aviation Management Bill 2020, which proposed a consolidation of aviation assets in the country, including KQ and the Kenya Airports Authority (KAA), into one holding company.
This would have resulted in the nationalisation of the company and its delisting from the NSE, hence the decision to suspend trading on the counter for three months in July 2020 to allow for a reconciliation of the shareholder register.
The nationalisation plan fell through after the Bill was withdrawn from the National Assembly, with the government pursuing alternative routes to rescue the airline. Meanwhile, the trading suspension was kept in place through a series of extensions by the Capital Markets Authority (CMA).
The regulator, however, declined a request by KQ chief executive officer Allan Kilavuka to extend the trading freeze into 2025, saying it was no longer necessary in the eyes of the regulator.
There was no evidence of an imminent major restructuring, merger or takeover that would make the suspension relevant, the CMA said.
“The CMA is principally mandated to protect investor interests. This means that investors should be able to access trading of listed securities…to purchase or sell securities… as they deem fit,” CMA chief executive officer Wyckliffe Shamiah said in his January 5 reply to KQ’s request.
“Whereas the Authority is cognisant of the reasons for the continued suspension to January 5, 2025, we believe the previous risks to shareholders and/or circumstances necessitating the protracted suspension have dissipated.”
The suspension was also the subject of a petition filed by a KQ minority shareholder at the Capital Markets Tribunal, challenging the last extension which had been granted on January 4, 2024.
The CMA also made note of the fact that KQ made a return to profitability in the first half of 2024, reporting a net profit of Sh513 million on the back of lower finance costs. This was largely helped by the government taking over the airline’s largest foreign currency debt of Sh88 billion, owed to the US Exim Bank.
The State, which had guaranteed the debt, restructured the loan into a shilling-denominated on-lent facility with a longer repayment tenor, therefore lessening KQ’s annual finance cost spend.
By turning the loan into a local currency facility, the government has also shielded KQ from future exchange-related losses when sourcing for dollars to pay the lender, as was the case in 2023 when the shilling depreciated by more than 20 percent against the greenback.