The persistent bear market on the Nairobi Securities Exchange (NSE) has led three companies, including Credit Bank, to suspend their plans to list on the bourse. The bearish trend in the NSE, attributed to factors like foreign investor flight, has significantly impacted stock prices, prompting companies to delay their initial public offerings (IPOs) to avoid adverse pricing.
Key Points:
- Bearish Market Impact:
- The ongoing bear run on the NSE has affected stock prices, including those of major firms like Safaricom, KCB Group, and East African Breweries Plc (EABL). This bearish trend is discouraging companies from proceeding with their plans to list on the exchange.
- Companies typically prefer to go public in a bull market, allowing them to sell shares at premium valuations and benefit from a stable or rising market.
- Listed Companies Delay IPOs:
- Credit Bank, associated with the Simeon Nyachae family, along with two other unnamed companies from the food processing and mining sectors, has halted plans to list on the NSE. The decision is driven by concerns about the adverse impact of the current market conditions on share pricing.
- The Capital Markets Authority (CMA) confirmed the postponement of listing plans, citing the decline in the values of most listed securities.
- Challenges in the Private Sector:
- Factors such as the cost of listing, taxation, and an uncertain environment are affecting private sector companies’ decisions to delay IPOs. Companies are wary of market conditions and the potential impact on their valuation.
- The bearish market, coupled with currency depreciation and a shortage of dollars, is identified as a significant hindrance to reversing the downward trend.
- Credit Bank’s Listing Plans:
- Credit Bank, which had announced plans to raise at least Sh1 billion from the public through its listing, is still committed to the IPO. The bank’s shareholders are reportedly in consultation with regulators, the investing public, and shareholders to ensure the success of the listing.
- Credit Bank had previously sold a 20% stake to Mauritius-based private equity fund Shorecap as part of its capital-raising efforts.
- Market Conditions and Indices:
- The NSE is currently experiencing a bear run, with analysts pointing to the depreciation of the shilling and a shortage of dollars as major obstacles to reversing the bearish trend.
- The market value of all stocks listed on the NSE declined by 10.72% to Sh1.48 trillion ($9.67 billion) in the three months to September 30, reflecting the challenging market conditions.
Conclusion: The decision by companies, including Credit Bank, to delay their listing plans on the NSE underscores the impact of the current bearish market conditions. Concerns about share pricing and valuation in a challenging market environment have led to a cautious approach, with companies awaiting more favorable conditions for their IPOs.
Consumer goods giant Procter & Gamble has announced its plans to dissolve on-ground operations in Nigeria and transform the country into an import market. The Chief Financial Officer of the group, Andre Schulten, cited challenges in doing business in Nigeria as a dollar-denominated organization, and the macroeconomic realities in the country as reasons for this strategic decision. The company aims to focus on markets with the highest potential. Procter & Gamble’s restructuring program will particularly target Nigeria and Argentina, where operating in the current macroeconomic environment is deemed difficult.