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Unlisted stocks miss out as NSE shares rally
ILAM Fahari Reit was listed on the NSE unquoted securities platform on July 10,2024 at Sh11 and continues to trade around the same mark according to the entity’s manager.
The stocks of companies listed on the unquoted securities platform (USP) have missed out on the broad Nairobi Securities Exchange (NSE) market rally on limited activity and restricted trading.
Issuers of securities have in the past favoured the USP over the main public market, seeking to cushion themselves against undervaluation of their firms.
The ongoing recovery of the NSE has, however, seen stocks on the USP miss out on similar gains as activity on the platform, which is limited to private placements and restricted offers, remains muted.
According to data from the platform, Acorn Development Real Estate Investment Trust (D-Reit) posted a gain of 5.2 percent since the start of the year to July 25 to trade at Sh26.68.
This is a far cry from the NSE where the Nairobi All Share Index (NASI) returned a gain of 25 percent in the first half of the year.
Acorn Investment Reit (I-Reit), meanwhile, marked a lower gain of 3.1 percent to Sh22.91, while the unit price for Ilam Fahari I-Reit and the Batian Income Property Fund remained unchanged at Sh11 and Sh100 respectively from the start of the year.
Total volumes traded over the period have also remained muted with Acorn’s D-Reit and I-Reit trading 12.7 million and 39.1 million units respectively.
Ilam Fahari I-Reit has, meanwhile, traded 1.2 million units so far, while the Batian Income Property Fund has not had a trade.
The manager of Ilam Fahari I-Reit, ICEA Lion Asset Management (Ilam), says the muted activity and gains in the USP reflect tighter trading requirements.
The real estate fund requires a minimum of Sh5 million worth of units for a trade to be executed.
This contrasts sharply with the public markets which are soon to allow the trading of a single share by investors, allowing transactions of less than Sh10.
“Specifically for the Ilam Reit, you can only trade Sh5 million worth of shares. That means for any transaction, if there is any seller, there must be consolidation,” said Ilam chief executive officer Einstein Kihanda.
“The challenge becomes getting the appropriate number of shares to qualify to trade in the market. There have only been few trades because it takes time to consolidate the shares required for trading.”
Ilam and other shareholders voted to remove Fahari I-Reit from the public market to the USP last year ahead of a restructuring process.
The exit from public markets was to allow the property fund flexibility and time to restructure itself without ‘prejudicing’ retail or non-professional investors.
Ilam opted for the USP to provide an exit/liquidity avenue to the remaining professional investors but warned that there was no guarantee on liquidity when needed.
Ilam Fahari I-Reit price is unchanged from the Sh11 offer price it used to exit non-professional or individual investors during its delisting from the NSE.
“What we were trying to do is shield the fund to allow the restructuring that needed to take place without the vagaries of the main market,” added Mr Kihanda.
Listings on the USP allow for access to the capital markets through a regulated environment but without the stringent listing requirements or issuer obligations. The USP has five listings including the Linzi Sukuk bond.
