Tuesday, April 16, 2024

Top US Safaricom investor sells 600 million shares in protest

One of Safaricom’s top investors has sold hundreds of millions of shares in protest. The investor, who has been identified as FMR LLC – which also trades as Fidelity Institutional Asset Management – sold 600 million shares in protest over dividend repatriation.

This mega sale of shares has been revealed by a report that appeared in local business newspaper Business Daily.

According to the report, the investor has brought their stake from highs of 921.1 million shares to lows of about 314 million shares.

The sale of these shares began in the fourth quarter of 2022 when the investor started complaining about delays in getting dividends in time due to dollar shortages in Kenya.

The newspaper quoted a source privy to the matter as saying that “FMR’s decision on Safaricom holding is mainly because of the delay in being able to repatriate their dividends. This breached an internal requirement for them as it would for other foreign investors.”

The newspaper further quoted the source as saying;

“It can be disastrous for foreign investors, typically pensions, endowments, and asset managers with regular distribution obligations to not receive scheduled dividends and sale proceeds, and it is normally a significant red flag that leads to a withdrawal of foreign investors.”

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By the time the mega sale was kicking off, the investor was one of the top five investors in Safaricom.

In February this year, Safaricom announced a Sh. 0.55 interim dividend per share amounting to a total of Sh. 23.03 billion. This announcement marked the second consecutive year the company was cutting the payout to investors.

“The board of Safaricom PLC is pleased to announce that at its meeting that was held on 21 February 2024, it was resolved to approve the payment of an interim dividend of Sh. 0.55 per ordinary share held amounting to Sh. 23.03 billion, for the year ending 31 March 2024,” the company announced.

“The interim dividend will be payable to shareholders on the register of members as at the close of business on 15th March 2024 and will be paid on or about 31st March 2024.”

The sale of shares by FMR has also come at a time when the company’s share price has not been strong at the local bourse. For instance, the price has fallen from Sh. 29.82 on September 5, 2022 to Sh. 13.30 as at March 1, 2024. This has cut Safaricom’s valuation at the bourse from Sh. 1.19 trillion to Sh. 532.9 billion.

The shareholding structure at Safaricom comprises of the Government of Kenya which holds a 35 per cent stake, Vodacom 35 per cent, Vodafone 5 per cent) and free float of 25 per cent.

According to Safaricom, 96 per cent of shareholders hold a maximum of 10,000 shares and are mostly comprised of the local individuals.

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