The Nairobi Securities Exchange (NSE) is set for its first new listing in five years by packaging material manufacturer
Ltd (Skol) after the firm received regulatory approval for market entry.
Letters to the company by the Capital Markets Authority (CMA) and the NSE approving the entry by introduction indicate that it will be listing 50.5 million shares, at a unit price of Sh5.90, valuing the transaction at Sh298 million.
Skol will list on the Small and Medium Enterprise (SME) Segment of the NSE, which was formerly known as the Growth Enterprise Market Segments (GEMS).
The company made its listing application last year. Unlike an initial public offer (IPO), a listing by introduction does not involve selling of shares to the public in order to raise capital and is therefore seen as an easier and cheaper route to the market.
Some companies, however, undertake private placements ahead of listing by introduction for capital raising purposes, or to increase their number of shareholders to meet the minimum required for entry into the NSE.
“Approval is hereby granted to Skol to list on the SME market segment of the NSE, 50.5 million ordinary shares at an offer price of Sh5.90…The NSE is directed to admit on the SME market segment the shares of Skol,” reads the CMA letter.
In a separate letter dated July 3, the NSE said its board had approved the listing, which it said will help re-energise Kenya’s primary equity market and the visibility of the SME market segment.
“We take this opportunity to welcome Skol to the NSE and encourage full adherence to the applicable continuing listing obligations,” said the NSE.
Skol becomes the 14th company to list by introduction at the NSE, with the last such entry being Homeboyz Entertainment in December 2020.
This has also been the preferred path for a majority of recent market entrants, including Rwandese bank BK Group (2018 cross listing), Absa NewGold ETF (2017), Nairobi Business Ventures (2016), Kurwitu Ventures and Flame Tree Group (both 2014) and Home Afrika Ltd (2013).
In the meantime, there have only been two IPOs at the NSE since 2011—the NSE’s self-listing in September 2014 and the October 2015 listing of the property fund Fahari I-Reit which was later delisted.
The lack of IPOs at the Kenyan bourse over the last decade is in contrast with the boom years of the mid to late 2000’s, when the NSE welcomed the likes of Safaricom, KenGen and Co-operative Bank of Kenya in large IPOs which introduced more than 1.5 million new investors to equities.
However, most of the retail investors who entered the market during the IPO boom period have gone dormant, with foreign investors dominating turnover for years despite holding less than 20 percent of the issued shares at the bourse.
A prolonged bear run from 2015 also discouraged new IPOs as firms feared that they would not realise optimum value for their equity when selling shares to the public.
The rise of private equity as an alternative source of capital for businesses also hurt the performance of the IPO market, given that the PE funding was quicker to disburse and easier to obtain in terms of regulatory requirements.
The NSE has, however, set itself a target of listing 40 new companies and netting an additional nine million retail investors over the next five years, as per its 2025-2029 strategy that was published in April.
To onboard the new investors, the bourse said, it intends to undertake extensive investor education, simplify onboarding processes and create accessible trading platforms.
