September 21, 2020//-Local individuals are being squeezed out of the ownership of Safaricom by foreign investors and local companies, reversing the government’s objective of boosting Kenyan retail investors’ stake in the country’s most profitable firm.
August regulatory filings show that domestic investors, including citizens of East African countries, now hold 1.5 billion units of the telco’s stock equivalent to a 3.8 percent stake.
This represents a 68.6 percent shrinkage from the 4.8 billion shares equivalent to an 11.9 percent stake they acquired on June 9, 2008 when the Nairobi Securities Exchange-listed firm went public through an initial public offering (IPO).
Foreign investors including asset managers like BlackRock, JPMorgan and Fidelity have meanwhile more than doubled their combined stake to 10.9 percent from five percent over the same period.
Local institutional investors such as insurers and the National Social Security Fund (NSSF) have also been accumulating the company’s shares.
Retail investors have been net sellers of Safaricom shares since the telco hit the stock market where its share price initially dropped sharply below the IPO offer price of Sh5 to hit lows of Sh2.50.
More than 250,000 retail investors exited before and midway through the telco’s long-term stock rally which gained momentum from December 2012, foregoing gains of more than Sh80 billion, excluding dividends.
The share is currently trading at Sh30 each at the Nairobi bourse and accounts for 55 percent of the entire stock market value.
The government allocated local investors 4.8 billion shares or nearly half of the 10 billion units sold in the IPO as a deliberate policy to help them share in the telco’s prosperity.
“Key among the government’s privatisation objectives is the need to broaden the shareholding of State-owned corporations among Kenyans, as well as to deepen the capital market and raise resources for infrastructure development,” the Treasury wrote in Safaricom’s IPO prospectus.
The government raised Sh50 billion from the IPO by selling 10 billion shares equivalent to a 25 percent stake in the telco to individuals, local firms and foreign investors.
The hype surrounding the offer saw retail investors apply for 22.6 billion shares or 4.7 times the 4.8 billion units that they were ultimately allocated.
Banks offered their customers loans to buy the shares while investment groups were also encouraged to participate in the IPO.
Some 800,000 new accounts were opened because of the offering, more than doubling the number of investors at the NSE to 1.5 million from 700,000.
Retail investors paid a total of Sh24 billion for the shares which would have a current market value of Sh144 billion, assuming the investors held on to all the stocks to date.
The investors have, however, sold a total of 3.2 billion shares over the years, leaving them with 1.5 billion units now valued at Sh46.6 billion.
Besides capital gains, those who sold their shares in the early years have missed out on lucrative dividends that Safaricom has paid.
The telco has so far made cumulative cash distributions of Sh357 billion equivalent to Sh8.9 per share in its life as a publicly-traded firm.
Some individual investors, including billionaires, have benefited the most from Safaricom as they have continued to accumulate the company’s shares.
Billionaire investor John Kibunga Kimani, for instance, now holds 16.2 million shares worth Sh486 million according to the August records.
He started buying the telco’s shares at the IPO when retail investors were required to apply for a minimum of 2,000 shares.
Mr Moses Thara is another high-net-worth investor in Safaricom with 10.1 million shares worth Sh303.2 million.
A total of nine local investors hold 106 million shares valued at Sh3.1 billion.
The telco is the region’s most profitable firm and also ranks high in terms of margins.
Its Sh73.6 billion net income in the year ended March represented a 29.3 percent margin on the revenue of Sh251 billion in the same period.
The stake held by individuals is expected to continue dropping going forward as local and foreign institutional investors gather more assets and deploy them in buying Safaricom and other stocks.
This will frustrate the government’s plan to have retail investors form a significant part of the telco’s ownership.
“The vendor (government) wishes to achieve a balanced distribution of the offer shares between institutions, companies and individual members of the public in addition to ensuring that employees of Safaricom participate in the offer,” the telco said in the prospectus.
Safaricom has become a must-have stock for most local and institutional investors who nowadays transact trades in the telco’s shares worth billions of shillings per day.
Latest available disclosures show that NSSF, for instance, invested nearly a quarter of its equities portfolio in Safaricom in the year ended June 2018, raising the portion from 14.8 percent the year before.
The pension fund held Safaricom shares with a market value of Sh15.8 billion in the review period when its total stocks portfolio stood at Sh65.3 billion.
Data provider FactSet shows that Fidelity Management & Research was one of the top foreign investors in Safaricom with 809.4 million shares worth about Sh24 billion as at July 31, 2020.
