Shareholders of retail chain Quickmart gained Sh5.6 billion in paper wealth on the first day of trading after listing at the Nairobi Securities Exchange (NSE) on Thursday, with the stock up 19 percent on its initial public offering (IPO) price.
The company made its trading debut at a price of Sh10 per share on Thursday morning, before settling lower to close trading at an average price of Sh8.90 a unit on 9.7 million shares traded. This resulted in a traded value of Sh86.2 million.
Quickmart’s shares were priced at Sh7.50 each in its IPO, which closed on November 6, meaning the capital gain on the stock on the first day of public trading stood at Sh1.40 per unit.
Quickmart listed four billion shares on the Nairobi bourse, following the oversubscribed IPO that valued the company at Sh30 billion.
At the closing price of Sh8.90 a share, the company was valued higher at Sh35.6 billion, making it the 19th largest listed firm by market capitalisation.
“Since it was oversubscribed in the IPO, we expected to see some of the demand spill over into the secondary market upon listing, boosting the share price,” said Wesley Manambo, a senior research associate at Standard Investment Bank.
“Foreign investors whose demand was unmet when they received only half of their applications in the IPO are also coming into the secondary market, and could help sustain the price in the near term.”
Quickmart’s public offer was the second at the NSE this year after Kenya Pipeline Company’s IPO sale in March, with Family Bank also listing by introduction in June.
The retailer’s day-one gain of 19 percent is higher than the two percent gain recorded by KPC when it entered the market on March 10, but lower than Family Bank’s 44 percent jump upon listing on June 23.
KPC was priced at Sh9 per share in its IPO, but after recording a price of Sh9.50 per share in its first trade, it settled to close its first full day at the NSE at Sh9.18 on trades of 2.08 million shares.
Family Bank entered the market at an introduction price of Sh18 per share in June, and after touching an intra-day high of Sh50 per unit, it closed its first session trading 1.9 million shares at an average of Sh26 per share.
IPO shares are normally exempted from the usual price movement limit of 10 percent in the first day of trading upon listing, giving investors who sell on the day a chance to book outsized gains immediately depending on the demand for the shares.
The Quickmart listing was seen as a test for the stock market as an exit option for private equity investors like the retailer’s biggest shareholder, Adenia Partners, who have generally preferred sales to fellow funds when selling stakes in local enterprises.
Family-owned firms were also keenly watching the sale to see whether the stock market remains a viable option for raising capital, based on the appetite for the shares among the investing public.
Quickmart’s founders and private equity (PE) fund Adenia Partners put up two billion shares for sale in the IPO —half of their holdings— netting them Sh15 billion from the transaction.
The IPO attracted 18,492 applications for 2.45 billion shares, representing an oversubscription of 22.7 percent that underlined the demand for the offer, underwritten by global funds led by the World Bank’s International Finance Corporation (IFC) which has taken a stake of 6.49 percent in the retailer.
The three other anchor investors were UK government-backed fund MOBILIST (6.5 percent), US-based investment firm 337 Frontier (6.5 percent) and UK fund manager RWC LLC (4.32 percent). The anchor investors hold a collective 864.2 million shares, or 21.6 percent of Quickmart. The shares gained Sh1.21 billion in value to Sh7.7 billion after yesterday’s trading.
Quickmart’s original shareholders were, however, the biggest winners in yesterday’s share price gain, courtesy of their two billion shares held collectively through an investment vehicle known as Sokoni Retail Kenya Limited.
They comprise Adenia, the retailer’s chief executive officer Peter Kang’iri and the founders of Quickmart and Tumaini supermarkets.
Adenia acquired a 55 percent majority equity stake in Tumaini Supermarket in 2018 and a 51 percent stake in Quickmart in 2019, before merging the two businesses under the Quickmart brand in January 2020.
The Mauritius-based PE fund and its co-investors in its fund has an effective stake of 25.4 percent or 1.02 billion shares in Quickmart at listing, with the value of its holding rising by Sh1.42 billion to Sh9.04 billion on Thursday.
The Kinuthia family saw the value of its 638 million shares or 16 percent stake rise by Sh893.2 million to Sh5.68 billion, while the Tumaini founders’ stake appreciated in value by Sh336 million to Sh2.14 billion.
Mr Kang’iri, who held a stake of 2.7 percent in the retailer after selling half of his shares in the IPO, has booked a paper gain of Sh151.2 million on the stake on Thursday, valuing it at Sh961.2 million.
Other Kenyan and EastAfrican Community (EAC) investors who participated in the IPO were allocated a total of 1.04 billion shares, whose value rose by Sh1.46 billion to Sh9.3 billion.
Foreign investors meanwhile booked a gain of Sh329.3 million on their 235.2 million shares (5.9 percent stake), which were valued at Sh2.1 billion at close of trading on Thursday.
