Kenyan investors have been offered free shares to motivate them to buy stock in telecoms firm MTN Uganda that opened its Sh27.6 billion initial public offering (IPO) yesterday.
South Africa’s MTN Group is selling 4.47 billion shares in its Ugandan subsidiary at a price equivalent to Sh6.2 apiece.
To boost chances of the offer being successful, which will require applications for purchase of at least 1.1 billion shares, MTN is offering prospective investors free shares of between five and 10 units for every 100 units allocated.
This represents an effective discount of five to 10 percent of the purchase price, assuming an investor gets his full allocation and the incentive shares.
There are no allocation quotas but Ugandan investors will be given priority in case of oversubscription, offering Kenyans unlimited room to snap the stocks.
“As part of the offer, and in alignment with the objective of broadening Ugandan shareholding in MTN … the selling shareholder will transfer incentive shares at nil cost to the categories of qualifying applicants that apply for and are allocated the sale shares,” the prospectus says.
“Accordingly, eligible applicants will receive an allocation of sale shares which the applicants will be required to pay for and, in addition, an allocation of incentive shares which the applicants will not pay for.”
The Uganda Communications Commission (UCC) in 2019 directed all foreign-owned telcos to reserve at least 20 percent of shares to locals and East Africans by end of 2021 in the deal meant to spur local ownership of the telecoms industry.
MTN Uganda is currently owned by MTN Group (96.01 percent) and businessman Charles Mbire (3.98 percent).
The IPO is open to Ugandan investors as well as citizens of other East African Community member states, including Kenya. Foreign investors can also participate in the offer.
Ugandan investors, however, are being given the top priority in the share sale.Institutional investors in Uganda and other East African countries will have to invest larger amounts to get free shares.To get five free shares for every 100 units allocated, the professional investors must apply for stock with a minimum value equivalent to Sh109.3 million.To qualify for 10 free shares for every 100 units allocated, the investors will need to apply for stock worth a minimum of Sh5.5 billion.Institutional investors stand to gain the largest discounts that could run into hundreds of millions of shillings.The incentive shares are rare for an IPO in the regional market and signals MTN’s determination […]