Blow to exchange operator as Transcentury delists, Tuskys IPO drags
NSE continues to suffer setbacks as Transcentury and Kenya Airways prepare to exit the exchange. Efforts to replace lost listings have been slow as Ibuka programme frontrunners like Tuskys face financial crisis.
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| NSE CEO Geoffrey Odundo, Tuskys CEO Dan Githua and NSE Chairman Samuel Kimani |
Transcentury (TCL) wants to go private and will seek shareholders’ approval to delist its stock from the Nairobi Securities Exchange at a special shareholder meeting planned for July 30. Transcentury is an investment company in the category of Centum Investment Company Ltd (CTUM) and Olympia Capital Holdings Ltd (OCH). Its portfolio companies include cable vendor East African Cables Ltd (CABL).
Transcentury seeks to woo more investors in order to raise more capital for investing. It believes delisting will make it more attractive to deep-pocket investors that prefer putting their money in private entities, according to a regulatory filing.
Transcentury’s delisting would deliver a major blow to the Nairobi Securities Exchange company (NSE company), the operator of Kenya’s stock exchange. The NSE company loses a customer whenever a company delists from the stock market. The exchange operator seeks to increase the number and diversity of stocks on its platform in order to offer stock investors broader choice.
But the NSE has suffered multiple setbacks in recent years as companies delist and its efforts to make up for the losses have achieved little if anything. For example, eight companies have delisted their stocks from the NSE platform over the past six years, hence shrinking NSE company’s customer base.
The list of companies that have exited the NSE platform include fuel service stations operator KenolKobil and Atlas African Industries, all of which delisted last year. Notably, KenolKobil delisted after it sold itself to a French energy group called Rubis Energie.
Marshalls East Africa, Hutchings Biemer and A.Baumann delisted their stocks in 2017. Rea Vipingo and CMC Holdings delisted in 2015 while Access Kenya delisted in 2014. Access Kenya is one of the shareholders in submarine broadband cable operator Teams alongside Safaricom PLC (SCOM), Telkom Kenya and the Kenyan government.
The NSE could suffer more setbacks this year beyond Transcentury’s delisting. For example, the government is working on retaking Kenya Airways as part of a rescue plan for the national airline. The government aims to complete nationalisation of Kenya Airways by October, after which the stock will delist. The government has already suspended trading in Kenya Airways shares as it works on its takeover.
New customers aren’t easy to come by for the NSE
Delisting of stocks happen all over the world. But exchanges make up for the loss by bringing new stocks on board. But the NSE has struggled to replace the stocks that leave its platform.
It launched a programme called Ibuka to groom companies looking to go public. About two dozen companies have joined NSE’s Ibuka programme, including supermarket chain Tuskys and events company Homeboyz Entertainment.
Tuskys, which NSE CEO Geoffrey Odundo in 2018 touted as ripe for IPO, has run into headwinds that threaten to delay its listing. Notably, Tuskys IPO hopes were pinned on the retailer bringing on board a cornerstone investors to inject more cash into the business. But Tuskys’ strategic investor search has yielded no fruits so far, leaving the retailer in a financial crisis that has been made worse by the Covid-19 turmoil.
The competition regulator recently hit Tuskys with several restrictions around stores expansion and executive compensation after the retailer failed to pay its suppliers in time. The crisis suggests Tuskys IPO may be a long shot for now. And that, of course, adds to the woes of the NSE company.
Family Bank, which is doubling down on motor vehicle purchase financing business, is another companies that has explored public listing. But Family Bank IPO also looks to be in doubt this year as banks grapple with the coronavirus fallout.