The Nairobi Securities Exchange (NSE) #ticker:NSE has once again been plunged into an integrity crisis after it emerged that suspicious trades occurred on the KenolKobil #ticker:KENO counter ahead of Tuesday’s announcement of a looming buyout of the company.
The Capital Markets Authority (CMA) said it had identified “potentially irregular trading of the KenolKobil counter in the run up to Rubis Énergie’s publication of the Notice of Intention” to take over the oil marketer.
The suspicious accounts have since been frozen.
CMA Thursday declined to disclose the identity of the offending traders, although market insiders indicated that the shares were traded through high net worth nominee accounts.
“The CMA will disclose if any breaches of the law were established and the appropriate action taken, if any, once the investigations are complete,” the agency said in response to queries on the matter.
Rubis on October 23 bought a 24.99 per cent stake or 367,793,124 KenolKobil shares from Wells Petroleum to achieve the minimum ownership threshold it needed to launch a takeover bid.
The Business Daily’s analysis of trades in KenolKobil shares this month shows that there was a significant increase in volumes between Monday, October 15 and October 22.
Investors moved 61.1 million shares worth Sh909.8 million during the period, averaging a turnover of Sh151.6 million a day at an average price of Sh14.20.
The CMA has its eyes fixed on the fact that buyers of the shares stand to earn about Sh500 million once the takeover is complete, taking into account the Sh8 premium on Rubis’ offer price of Sh23.
The biggest trades of KenolKobil shares were done on October 18 and 22, when 27.9 million and 29.5 million shares changed hands respectively.
At the prevailing prices, the shares were worth a cumulative Sh860 million.
NSE data also shows that KenolKobil recorded significant price increase on the two trading days —up 9.7 per cent to Sh14.70 on October 18 and 4.5 per cent to Sh15.25 on October 22 — indicating the bulk share buyers were willing to pay a premium in order to get their hands on the stock.
In the preceding two weeks, KenolKobil traded at an average of 101,844 shares a day, with a daily turnover average of Sh1.6 million. The company also shed 11 per cent of its value in this period.
Daily market reports by Standard Investment Bank on October 18 and 22 showed that the trades consisted of local investor(s) buying and foreign investor sales. On both days, the stock had net foreign sales of Sh838 million.
Eyes will now turn to the CMA to see whether the regulator will disclose the identity of the alleged culprits of suspicious trading.
The Capital Markets (Licensing Requirements) (General) Regulations compel stockbrokers to maintain client information linking each transaction to the beneficial owners including in cases of nominee accounts and trusts.
The regulator should therefore be able to unearth their identities, if they were trading behind the curtain of such accounts.
Insider trading sees an investor profit by buying shares ahead of the market based on knowledge of events that would drive the price up, or dumping shares to avoid losses due to prior knowledge of negative information.