What will bring back retail investors to the bourse through IPOs

Nairobi Securities Exchange.  

Photo credit: File | Nation Media Group

Someone should have advised President William Ruto that targeting 10 initial public offers (IPOs) within 12 months was not only a bad idea but also gave the wrong signal.

Was it a political stunt? Another misguided privatisation marketing attempt? Part of a wider political marketing? Choose what you believe but it's 18 months and counting since the big announcement. No one is excited anymore.

Closely tied to this ambition is another one of “a nation of shareholders.” On the surface, it makes sense; look how much thrashing we’ve received since foreigners chose to play the sell side.

All we need is another blockbuster listing. But is our zeal to get Anyango, just like Wanjiku, to own shares a bit too much?

I have referenced (many times) here the “let's get Sid investing again” campaign championed by the former UK prime minister, Margaret Thatcher. Although the campaign showed a great hold in the first 10 years, it fizzled out years soon after her exit from the premiership.

A report by ResPublica/Co-operatives UK now shows that individual share ownership has nearly halved to just 11 percent of the total value of United Kingdom (UK) traded shares compared with 20 percent in the mid-80s.

Most people choose to own shares through their pensions and mutual funds and this makes about 46 percent of the total value of UK traded shares today. So is a “nation of shareholders” still an important campaign?

I say 'yes' for three reasons: liquidity, liquidity and more liquidity. And how do we get there? I am tempted to say let’s revisit something that has worked before.

Quick profit

Everyone is well aware that for 'political motives,' the government priced Safaricom shares cheaply in an attempt to ensure heavy investor demand and a first-day premium to claim the sale is a success.

Such sell-offs tend to be popular because people know they are something of a giveaway that will allow them to cash in for a quick profit. Such a strategy has a high probability of “bringing Anyango back to the market.” Of course, no repeat of 2008 is guaranteed and any upside might be constrained by recent volatility.

It’s a tall order. Matter of fact, the above approach has been blamed for attracting the wrong type of investors who leave immediately after IPO action cools off.

Besides, which are these blockbuster State-owned enterprises (SOEs) the investing public is drooling for? Sentiment surrounding share market investments is also pretty low and I think “retail offers” are a higher-risk option for improving equity ownership.

Shares have proven tricky investments since 2019 with prices buffeted by Covid-19, high interest rates and erratic profitability. In addition, financial literacy in the country is alarmingly low. Only 38 percent of Kenyans are financially literate, according to a 2021 Global Financial Literacy Survey.

Competition with high-yielding treasuries and investor mis-education have created additional challenges too.

But I remain an optimist. I believe the planned sale of these SOEs is something to tell 'Anyango' about.

Mwanyasi is MD, Canaan Capital.

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