NSE buyouts likely to extend listings drought
- Rubis Energie proposal to buyout KenolKobil signals the real threat of Private Equity (PE) to the NSE with the deal likely wiping out up to Ksh. 32 billion in market capitilization upon confirmation later in the year.
- The relative expensive and time-consuming IPO's have similarly seen private firms stay away from the bourse as they opt for the rather easily to access Private Equity.
- Analysts recommend a review of the NSE new listings strategy to include the privitisation of state corporations and the lowering of entries to the bourse.
Private buyouts of Nairobi’s Securities Exchange (NSE) listed firms are likely to extend the bourse’s already lengthy listing drought.
This as some of the listed companies mull exits through private equity acquisitions while the non-listed firms, tipped to take up the listings challenge, sit on the fence weighing their options on a possible listing decision.
According to analysts, exits through private takeovers are likely to have a negative impact on the NSE by limiting investors’ options. Prolonged private buyouts could on the other hand deteriorate the country’s capital markets attractiveness.
“When a good company is no longer trading in the market, that limits the pool of companies available to investors and when there are no new listings to accompany the exits, this could be negative for the NSE as both the market capitalization and liquidity dips. Foreign investors would in general look at such a market as unattractive and wouldn’t be interested in making investments,” AIB Capital Head of Research ,Sarah Wanga told Citizen Digital.
The recently proposed takeover of listed KenolKobil by French firm Rubis Energie could see the NSE lose out one of its significant players who commands a market capitalization of nearly Ksh. 32 billion.
Such an outcome could likewise compound on the bourse’s muted trading activity manifested by the high count of companies running into administration to include Athi River Mining (ARM) and Deacons most recently.
Private Equity (PE) has grown to rival the NSE as an option to company’s capital needs. Firstly, private firms such as Rubis can through their well-endowed resources acquire listed firms while for private companies, the Initial Public Offer (IPO) procedure is relatively expensive and time consuming making PE the next best option to unlocking capital.
Market Analyst Aly Khan Sachu argues for a different view into sparking new listings by the NSE, a look he says can only be spurred by the state through the privatization of some of its vast corporations.
“Listings are typically led by government. If you look around the world, this is where you get massive participation from the citizenry. From a strategy point, this is a way of increasing the society’s sense of a stake in economic development. This is also the catalyst to bringing other players into the market as well,” Mr. Sachu said.
In spite of the listing concerns, the Nairobi Securities Exchange is confident of striking gold through its recently established Ibuka incubation program which seeks to groom and capacity build mid-sized private firms for possible future listings.
“We have been in discussion with a number of companies on listing on the bourse, though I can’t give any names on the same at this point, we believe that these companies will see the value of listing as soon as the market conditions improve,” the NSE responded to Citizen Digital’s queries on the timelines to the next possible market entry.
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