Migabo! Shares! IPO! These have been corporate and street #tags for September 2023 capturing the attention of many whether they knew the deal or not, the Airtel Uganda IPO.
The Uganda stock market has evolved over time with the last 2 to 3 years giving it the greatest boost to initiate the heaviest Initial Public offerings.
An Initial Public Offering is a process that spearheads the conversion of a private Limited company (owned by a few or a defined category of people usually founders and other classified investors) into a Public limited company (owned or can be owned by any person from the public to include but not limited to institutions as well). It is executed in the primary market. Subsequent to the IPO, trading among investors happens in the secondary market. This is the second-largest IPO in Uganda calling for 800bn following the MTN IPO of 2021 (called up 900 bn).
Quite astonishing! Why are telecom companies lately taking the lead in listing? In 2021, the Government of Uganda in conjunction with the Capital Markets Authority (CMA) amended the National Broadband Policy to ensure that all telecom companies list 20% of their share capital on the local bourse before the renewal of NTO licenses. This saw MTN take the lead in 2021. Despite a tight listing timeline of 12 months, Airtel requested an extension to 2023.
But why take part in the Airtel deal? With a current market share of 45.1%, Airtel continues to promise investors a brighter future supported by its innovative products and partnerships. A fair dividend policy of 95% boosts investor confidence in the strength of the company reserves and its going concern while offering a return. Stocks are passive investments, imagine earning a dividend at zero effort. It’s an opportunity to get exposed to a wider scope of financial instruments including bonds, bills, CPs, ABCPs, debentures, and preferential shares among others. Shares are freely transferable anytime, except for a risk of a loss on sale when they fall below the acquisition price and finally, an opportunity to hold a stake in a great company.
As Uganda’s Capital markets continue to grow, limited information on the public and investor side remains a major setback leading to undersubscription of shares (MTN at 65%) and undervaluation of stocks in the secondary market (BOBU, MTN). The narrative of grazing the bull on the market day, where stocks are only heard about at IPOs should change. The Government together with the CMA should lay strategies aimed at public sensitization to bridge the information gap so as to ensure lasting investments. Stimulation of the GEMs (Growth Enterprise Market Segment) as this is the solution to the financially struggling SMEs which are majority entities of the land and finally loosen the minimum requirements for companies listing on the Main Investment Market Segment (MIMS).
In a nutshell, the stock market is a great long-term opportunity to change the investment narrative in Low Developing Economies, boost economic growth, and solve more advanced macroeconomic problems that needn’t be overlooked. Nevertheless, investment knowledge ought to be sought as it gives justification to investor decisions when selecting given types of stocks. Airtel is a take, let’s participate! Can find more about Airtel in the bridged prospectus for the offer at – https://www.airtel.co.ug/assets/pdf/Airtel-Uganda-IPO-Prospectus.pdf.
By; Eugene Mulinzi
