The two largest shareholders in Sharia investment firm Kurwitu Ventures intend to sell eight per cent of their stakes within six months of its listing on the Growth Enterprises Markets Segment (Gems) of the Nairobi Securities Exchange (NSE) Thursday.
Abdirahman Abdillahi and Mohammed Hassan plan to cut their combined stake to 70 per cent from the current 78 per cent in order to increase the number of shares circulating.
Mr Abdillahi is the managing director of the firm and its majority shareholder with a stake of 51 per cent.
Mr Hassan owns 27 per cent of the company. They are both former senior executives of Dyer and Blair Investment Bank. Mr Hassan is the current chairman of National Bank.
“Technically, the free float is only 22 per cent. The two largest shareholders intend to reduce their holding by at least eight per cent in the next six months to increase the free float,” said Kurwitu in its listing statement.
The sale will erode the power of the two to pass a special resolution, such as offering a rights issue, by themselves while also taking away Mr Abdillahi’s powers to vote an ordinary resolution (such as that on election of directors) by himself.
Mr Abdillahi and Mr Hassan cannot, however, sell more than 25 per cent of their shareholding before the expiry of a year due to a lock-in clause appearing in the information memorandum.
The other shareholders are free to exit the company as soon as it lists. Kurwitu has valued itself at Sh127.8 million with the listing of 102,272 shares valued at Sh1,250 each. This will make Kurwitu the priciest share at the securities exchange.
Kurwitu said the listing price was deliberately set high in order to discourage uninformed investors from putting money in a high-risk investment without sufficient due diligence. The company, however, said it intended to lower the share prices through capital restructuring strategies such as share splits and bonus issues.
“In due course, Kurwitu Ventures may reduce the share price through a corporate action such as a share split or share bonuses (largely tied to profitability),” said the company.
The investment firm said it would be issuing preference shares to investors who wanted to participate in short-term ventures.
Last year the company made a net loss of Sh815,416 compared to a profit of Sh52,021 in 2012. In the six months to June this year, Kurwitu was still in the red with a Sh829,529 net loss.
The company will list through introduction, meaning it will not be raising addition capital. Kurwitu Ventures was founded in 2006 with the aim of investing in Sharia compliant investments and focusing on food production.
Financial institutions have been working on tapping the wealth of Muslim believers who have been locked out of the money market due to lack of Sharia-compliant investment options.
Kurwitu will be the second firm to list in the Gems market in a week following the listing of Flame Tree Group last week. Flame Tree, makers of Zoe beauty products and Roto tanks, listed 162 million shares at a price of Sh8 each which on Monday traded at an average Sh11.90.
The NSE launched the Gems segment in January 2013 to enable small and medium-sized firms raise capital, while benefiting from increased profile and liquidity.
Companies wishing to list on the platform must have at least 100,000 issued shares and a minimum fully paid-up capital of Sh10 million.
They are required to have adequate working capital and solvency and to have been in operation for at least one year. There is no profitability record required.