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[2008-09-26] Bourse Urges Delay in Co-operative Bank IPO
The Nairobi Stock Exchange is proposing a delay in sale of Co-operative Bank of Kenya shares to the public out of fear that the current market conditions are not favourable for the sale.
The bank has already submitted its initial public offering proposal to the Capital Markets Authority for approval as it seeks to raise at least Sh10 billion to fund expansion and infrastructure programmes.
"This is a bearish time for Co-op Bank to come to the market. We are proposing that it be postponed to February or March next year," NSE chairman James Wangunyu has said.
He was speaking at the NSE trading floor during the bourse's second anniversary since implementing the automated trading system, switching from manual trading to electronic.
However, in a quick rejoinder the lead transaction advisor, Dyer & Blair, said the market is ready for the IPO.
Price fall
Over the past two months, the Nairobi stock market has witnessed a prolonged price fall as inflationary pressure and high interest rates in the market take toll on the pricing.
The NSE 20 share index, a measure of performance in the market, declined to 4,004 points mid this month as investors exited the market.
A level lower than where it slid in January following the post-election election violence.
"An increase in food prices and electricity costs has meant a significant decrease in the amount of disposable income available to Kenyan households," said Mr Wangunyu.
The fear then is that uptake of Co-op Bank shares could be negatively impacted by the low appetite for investment at the stock market though NSE hopes that by next year, the market will have recovered.
The stock exchange also hopes that by then its proposal to the market regulator, CMA, for implementation of delivery versus payment to all applicants will have been approved.
That means that applicants for the Co-op Bank shares will only pay once the allocation is done avoiding the norm that has been refunds in past IPOs.
"We have already tested it with the Kenya Commercial Bank rights issue and it works very well even for the retail investors," Mr Wangunyu said.
Source: Copyright © 2008 The Nation.
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