Co-op Bank shares rise and fall on first day

By Macharia Kamau

The price of Co-operative Bank shares went up by 42 per cent immediately they commenced trading at the Nairobi Stock Exchange (NSE) on Monday morning, before sliding back to near the offer price.

About 3,000 shares were moved at Sh13.50 after the listing. This was an increase of Sh4 above the Initial Public Offer (IPO) price of Sh9.50.

The prices, however, nose dived to Sh9.55 in less than an hour of trading, but fought off going below the initial share price in the early trading hours.

The IPO opened on October 30, and ran at a time when the market was experiencing a bear run and achieved a subscription rate of 81 per cent.

Oversubscription

This is a contrast to the trend in the recent past where companies that have listed at the market have seen massive oversubscription.

Safaricom, the other company that was listed this year, was oversubscribed by more than 500 per cent.

"The tradition at the primary market level has been for IPOs to be oversubscribed. It is important to note that oversubscriptions of previous IPOs have been against a backdrop of a liquid and bullish market and the optimistic investor sentiment, especially among retail investors," said Mr James Wangunyu, the NSE chairman.

He, however, noted that the bear run has nothing to do with the market fundamentals but other factors that are not within NSE’s control, such as the global financial crisis that has had ripple effects on the country and the increased cost of living limiting investment capability of retail investors.

"It’s important to note that local investors are key to lifting this market out of its bear run. The market will not turn around until local investors come in and continue to trade, as the company fundamentals at the exchange are still strong," he said.

The IPO proceed will help raise Co-operative Bank’s capital base from Sh6.8 billion to Sh14 billion, which also factors Sh2 billion retained earnings. The bank raised Sh5.4 billion from the IPO, part of which will finance the bank’s expansion plans across the country.

Future plans

The institution will be opening 30 branches and plans to venture into mortgage financing next year. The money will also enable the bank to incorporate Information and Communication Technology in its operations.

"The bank’s business has grown immensely and there has been need to recapitalise to remain relevant in the industry and fund further growth and expansion," said Managing Director Gideon Muriuki.

The bank is the first organisation in Kenya’s co-operative movement to list at the market.

Minister for Co-operative Development and Marketing Joseph Nyaga rang the bell to mark the start of trading for the bank’s shares.