Kenya’s Capital Markets Authority has put on a watchlist a number of listed companies that are facing liquidity and corporate governance issues, with the possibility of suspending and eventually delisting them from trading.
The EastAfrican has learnt that at least eight firms listed on the Nairobi Securities Exchange are facing liquidity and corporate governance challenges that have seen their earnings drop significantly. The share prices of some firms has fallen below the par value, putting investors’ wealth at risk.
Some firms have even dropped into negative working capital territory, where their short-term assets are not adequate to cover short-term liabilities when they fall due, making it difficult to finance their day-to-day operations.
The CMA did not give the list of the affected firms but The EastAfrican understands that among them are cement maker Athi River Mining, Uchumi Supermarkets and Mumias Sugar Company.
“The authority is closely tracking the performance of these companies and is engaging the majority shareholders and the government where it has significant interest, in order to get a clear path to protect their interests,” CMA chief executive Paul Muthaura said.
“The process is ongoing and we will inform the public and the shareholders once we get a clear path.”
Our attempt to get a comment from the NSE on the action it has taken on these companies were unsuccessful, as chief executive Geoffrey Odundo had not responded to our inquiries by press time.
Analysts say investors are losing appetite for the stocks of these companies due to their weak fundamentals and a lack of clear plans on how they intend to turn around their fortunes.
“We are seeing an underlying investor fatigue with these companies such that even the share of volumes traded within the NSE are considerably lower than historically. What is not clear is the strategy these companies have put in place to address the issues that have caused the current situation,” said a senior analyst at Alpha Africa Asset Managers Daniel Kuyoh.
Mr Kuyoh added: “When they are clear with their turnaround plans and the plans begin to bear fruit then it will possibly change the company and investor prospects.”
Investor confidence
The development is likely to further dent investor confidence on East Africa’s largest stockmarket, which is struggling to attract new listings.Kenya has 67 listed firms of which three — Marshall East Africa Ltd, Hutchings Biemer and A. Baumann — have been delisted while one, Atlas Africa Industries Ltd.