Ivana Adhiambo was convinced that 2008 was the year she would become a millionaire. In her hands was a Sh. 600,000 lump sum which she had saved for three years. On the counter was the enticing Safaricom Initial Public Offer (IPO), in which the government was selling some 10 billion shares to the public. “I had the cash to invest, and having missed out on the Kengen IPO, I was sure this was my time to eat!” she says. Ivana was among some 750,000 Kenyans who were seeking the 25 per cent pie on offer. Billed at Sh. 5 per share, the IPO was going to be the biggest ever in Sub-Saharan Africa. By then, Safaricom had just announced a record profit of Sh. 20 billion, which was a 15 per cent increase from the previous year’s annual profit.
During the IPO that lasted 3 weeks from March 28, foreign and local investors placed bids worth a combined Sh. 231 billion, which was a 360 per cent oversubscription. Although she applied for a whopping 120,000 shares, Ms. Adhiambo got an allocation of 25,200 shares worth Sh. 126,000. “We were allocated 21 per cent of all the shares we’d applied for,” she says. Initially, Adhiambo was disappointed with her portfolio and quickly exited at Sh. 6, earning Sh. 25,000 gross profit. “I jumped back in when the share shot downwards at Sh. 3 per share. I invested Sh. 600,000.”
Alarmingly, many investors took loans from commercial banks to fund their investment. The loans were readily available at almost all local banks. James Kahunyo, a boda boda bicycle rider in GilGil town was one of those who took a loan to buy Safaricom shares. “I took a loan of Sh. 10,000 with which I applied for the minimum allocation of 2,000 shares,” he says. Others like Milkah Nduku and Catherine Wamuyu applied for the shares jointly. “Wamuyu had Sh. 20,000 while I had Sh. 10,000. We opted to open a joint account and apply for 6,000 shares,” says Nduku. In the same vein, there were investors who beat the minimum allocation per person by opening multiple accounts. Interestingly, the IPO came close to doubling the number of investors at the NSE from 800,000 to 1.5 million. The local retail pool saw an oversubscription of 669.7 per cent. According to Ndindi Nyoro, the head of stock brokerage firm Investax Capital Limited, many of the investors who applied for Safaricom at the time were looking to see their investment double on multiply overnight. “Safaricom had recorded huge profits, and with the Kengen IPO success story, many novice investors thought Safaricom could only reward better,” he says.
On June 9 2008, Safaricom shares began to trade at the Nairobi Securities Exchange, debuting at the bourse at Sh. 5 apiece. Since then, Safaricom has almost daily been the biggest mover at the bourse. In the early trading session following the IPO, the shares shot to a high of Sh. 7 per share. However, the surge was only short lived. The shares quickly reverted back to the debut price of Sh. 5 before taking a nose dive to lows of Sh. 4. With that nose dive, the long-wait for the shares to roar back into profits had begun. Individual retail investors were the hardest hit.
Despite record breaking performances by Safaricom, individual retail investors were left with no option but to bank dividends of less than Sh. 200 per year. “The dividends were too small, they couldn’t even pay the loan interest,” says Kahunyo. According to a report by the Capital Markets Authority (CMA) on the offer, “investors took in huge losses after securing loans from commercial banks to invest in the IPO.”
Between 2008 and 2013, the Safaricom share sold at below Sh. 5, and touched a low of Sh. 2 per share, where it stayed for months, and further scrubbing salt on the injuries investors were already nursing. “I was disappointed and swore to never invest in the stock market again,” says Wamuyu. Ironically, her partner Nduku remained positive that their investment would eventually pay them! “Safaricom was making big profits, which meant that the company was under a stable management and its future remained bright. There was no way the stock would stay stuck in the penny zone for the long term,” she says. Wamuyu, though, was not alone in the optimism boat. The top sharks at the NSE had seen an opportunity in Safaricom’s free-fall at the NSE.
Small and medium investors who sought to invest in a value stock took Safaricom in huge numbers. In 2013, Wamuyu and Nduku invested an additional Sh. 100,000 in Safaricom. “We acquired an additional 10,000 shares at a price of Sh. 9. The counter had begun to show signs of rising and we wanted to board the bus before it took off,” says Wamuyu. While those who exited at Sh. 9 were able to rake in a profit of Sh. 250,000 for every Sh. 100,000 invested at Sh. 2.50 per share and Sh. 170,000 for every Sh. 100,000 invested at Sh. 5 per share, those who took a long term approach have this year been smiling all the way to the bank!
Towards the last quarter of 2014 Safaricom touched an all-time high of Sh. 15.15 per share with a value of Sh. 600 billion by market capitalization. Between 2015 and 2016 bearish trend on NSE, Safaricom has been maintain a stable trend with a trading range of around Sh. 17 per share.
The current prices of around Sh. 17 per share reward IPO investors with gains of up to around 250 per cent on the Sh. 5 IPO price. “There were investors who cashed in the investment when the price rebounded from its all-time low of Sh. 2.50 at around Sh. 5 as cutting loss strategy. But those who were brave to buy Safaricom at its lowest prices when others were fearful and running away are today reaping mega profits if they held on,” says Mr. Nyoro.