Kevin Kigima Ng’ang’a, the co-founder of Pokeapay, a fintech company that offers e-commerce digital marketing and payment solutions to small and medium sized businesses, got a Sh. 3 million bonus at his workplace shortly after the famous 2008 Safaricom Initial Public Offer.
He remembers how at the time, the Safaricom share had fallen to lows of Sh. 2. 50 per share from the IPO offer of Sh. 5 per share. “I knew well that Safaricom shares were much undervalued. The shares were trading at around Sh. 2.50 per share,” he says.
Although he could have opted to buy the shares with his windfall, Kevin spent the bonus on poor lifestyle choices. “The choices I made did not have value. I could have bought the shares,” he says.
13 years later, Safaricom is trading at highs of Sh. 42 per share at the Nairobi Securities Exchange. “If I’d bought the Sh. 3 million Safaricom shares at Sh. 2.50 per share, my stake of about 1.2 million shares would today be worth about Sh. 50 million on gross,” he says. “Choices have consequences. Never rush into making lifestyle decisions whenever you get a small windfall from your work or career.”
Over the past 13 years that Safaricom has been trading at the NSE, investors who took a long term approach have raked in millions in their portfolio. Among these investors were the late Chris Kirubi, Baloobbhai Patel and John Kibunga. By mid-2013, the three had bought between 5 and 8.6 million shares among them.
Although for a long time the Safaricom stock remained suppressed at below the IPO offer price, the tide began to turn in mid-2013. By August 2013, Safaricom rose to a high of Sh. 7.35 per share at the NSE. By June 9, 2014, six years after Safaricom was listed on the NSE, investors had gained more than double their investment, with the stock trading at a high of Sh. 12.85. By 2014, though, individual investors in Safaricom had sold off 40 percent of their volumes. By August 2016, the stock hit a high of Sh. 21 per share. This meant that Kenyans who invested Sh. 500,000 in the stock had now gained a gross of Sh. 4,200,000!
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The effect of listing Safaricom’s 10 billion new shares into the NSE has been gigantic. After the IPO, the total number of trading accounts opened shot by 849,390 from 896,213 to 1,745,603. By July 11, 2008, NSE’s market capitalization rose to Sh. 1.21 trillion making it the largest ever market capitalization in Kenyan history. In the following days, daily market turnover shot to an average of Sh. 1 billion as the new 10 billion shares dominated the market.
Currently, Safaricom has a market valuation of Sh. 1.68 trillion. “There were investors who cashed in on the investment when the price rebounded from its all-time low of Sh. 2.50 at around Sh. 5 as a loss-cutting 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,” said investment advisor Evans Oluoch.
Safaricom’s share price has gained 62 percent since March 2020. This gain has seen the stock account for 60 per cent of the market’s total capitalization that stands at Sh. 2.77 trillion.
The growth of this stock over the last one year has been largely attributed to Safaricom’s decision to pay a total dividend of Sh. 1.37 per share for the year ended March 2021, amounting to Sh. 54.89 billion. In addition, a consortium led by Safaricom is set to launch operations in Ethiopia in 2022. The consortium has already bagged a license to operate. With the expected revenue stream, demand for the stock may go even higher that is current.