Investment firm TransCentury plans to make its shares available for trading on the over-the-counter (OTC) market within a month after delisting from the Nairobi Securities Exchange (NSE).
The company says this will help it achieve the twin objectives of raising new capital as an unregulated entity and allowing small investors to buy and sell its shares.
“The OTC platform will be set up immediately on delisting and in any case available for trading within four weeks of delisting,” TransCentury says in a circular to shareholders.
The OTC market has higher trading fees, reduced liquidity and less transparency compared to the NSE.
Traders buying or selling shares on the NSE are charged a total of 2.1 percent of the value of each transaction including brokerage fees to stock brokers and the bourse operator.
Fees on the OTC are not fixed and are negotiated on a case-by-case basis. A source familiar with OTC’s operations told Business Daily the fees average five percent of the value of a transaction or more than twice NSE’s charges.
The company will be joining insurance group UAP Holdings whose shares are also trading on the OTC.
TransCentury says it has been forced to exit the NSE because it needs to access new capital from investors who will only invest in it as a non-listed entity.
Once the company exits the NSE, it will remain a public company but will no longer be regulated by the bourse operator or the Capital Markets Authority (CMA).
“There is interest in the group from potential investors to fund the business on the basis that it is de-listed,” TransCentury said.
“This is based on, among others, the fact that investors such as certain private equity funds operate based on investment models and policies which require them to invest primarily in non-listed securities.”The company said the OTC platform will allow shareholders to offer their shares for sale to any interested buyers and for the parties to tailor their trading terms including terms of payments.“Trading of the shares is concluded directly between the parties (i.e. the seller and buyer),” TransCentury said.In contrast to the NSE whose trading is automated, the OTC system requires buyers and sellers to seek out one another and agree on the transaction price.The process of matching buyers and sellers can also be fast-tracked with the help of stock brokers and financial advisors.
