Tuesday, March 19, 2024

Why small KQ shareholders haven’t made any profit despite share’s rise

Retail investors in Kenya Airways were last Friday grappling with the sudden realization that a recent reorganisation of the airline’s capitalisation had cut their number of shares in the firm by more than half.

 Individual investors, who wanted to sell their Kenya Airways shares or review their capital gains as the airline’s stock hit daily maximum gains of 10 per cent, were surprised to find that their stakes had dropped by a factor of four — a crucial part of the airline’s capital restructuring plan they had failed to grasp.
The steep reduction in the volume of shares held by retail investors means their portfolios are still in the red and will only break even once the stock hits Sh21.2, a level that is 21.4 per cent higher than Friday’s closing price of Sh17.45.
Those who have sought to sell – using their old shareholding to work out their paper profits — got a rude shock when brokers informed them of their diminished ownership.

The Kenya Airways stock’s massive paper gains has largely benefited the 10 banks that converted their Sh22 billion loans into equity.

An aggressive rallying of the stock has seen the airline’s market capitalisation increase by a cumulative 12.8 times in eight days to hit Sh101.6 billion last Friday.

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