Capital Markets

Uchumi stock edges closer to discounted rights’ price

uchumi

Uchumi has set the price of its three for eight rights issue at Sh9 per share. PHOTO | FILE | NATION MEDIA GROUP

Summary

  • Analysts expect the rights to be largely successful owing to majority shareholders’ support of the cash call.

Uchumi’s share price Tuesday continued to edge towards the discounted offer price for its cash call set for next month.

The retail chain’s stock traded at Sh9.30 a unit, just above the Sh9 price that it has set for new shares to be issued to existing shareholders in a bid to raise Sh895 million.

If the market price falls below the offer price, investors may opt to forfeit the rights in favour of the cheaper stocks in the market.

Analysts, however, expect the rights to be largely successful owing to majority shareholders’ support of the cash call.

“If the top shareholders support the call as they have indicated, it will have more than 70 per cent success rate,” said Old Mutual Securities’ Eric Munywoki.

Kenya Airways traded below the rights issue price in its Sh21 billion cash call of 2012. It was, however, able to hit the success rate of 70 per cent following support from large shareholders including the government, which was interested in maintaining the company as a national carrier.

Mr Munywoki said the price drop was reflective of increased competition being faced by the retailer and poor performance of its regional operations. He sees an opportunity for an upswing.