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Tuesday, February 6, 2007

IPO Rules may be Overhauled

By Washington Gikunju

The Nairobi Stock Exchange (NSE) has proposed radical changes to overhaul the manner Initial Public Offerings (IPOs) are conducted.
NSE board says the changes are aimed at enhancing efficiency in the processing of IPOs.
Among the changes is that IPOs that exceed certain thresholds, say Sh5 billion, should be handled by at least three receiving banks.
This is to avoid distorting the banking sector during the offer period, the board says.
The proposal comes amid claims that the KenGen IPO nearly caused chaos in the banking sector owing to the huge amounts that were involved.
" The fact that the KenGen issue had only one receiving bank had a huge impact on the banking sector, which resulted in a liquidity crunch in the banking sector. The inter bank rates went up as all banks sought to access money from the one bank," read the statement.
The decision to review the entire IPO process was made by the board during its 2006 planning retreat.
It is aimed at incorporating experiences gathered from past IPOs into the way future issues are handled, a statement from the board said on Monday.
In the past one year the NSE has handled three IPOs and a secondary offer. The new proposals will be discussed at an IPO workshop slated for Friday this week.
Other proposals include mandatory training and certification of agents who handle IPOs.
The NSE and the Central Depository Systems Corporation (CDSC) also want to be involved in the pre-listing process so as to make the entire IPO process smooth.
NSE has also called for a supplementary timetable for IPOs in addition to the main timetable.
This is to cushion the entire process against the effects of unforeseen adjustments in the main timetable, the statement added.
In the past, the main timetable has had to be shifted resulting in insufficient time being allocated to subsequent events. Citing the Mumias Sugar secondary offer, NSE said, though the time for submitting applications was extended for three days yet no extension was granted for subsequent events.
Other issues to be discussed include new methods of setting share prices and the handling of refunds.
Previously investors have accused receiving banks delays in remitting their refunds.
Other participants at the workshop to be held, on Friday at the Kenya School of Monetary Studies, include transaction advisors, sponsoring stockbrokers, the registrars, receiving bankers and the CDSC.
Meanwhile, activity at the bourse remained subdued as the week opened with all the market indicators dropping.
Market capitalisation stood at Sh800 billion at close of business yesterday, Sh13 billion less than the figure recorded on Friday.
But in the gloomy picture, analysts remain optimistic, predicting a turnaround with the realisation of the proposed IPOs and the announcement of performance results for many of the listed companies.
Turnover dropped to Sh351 million on 4.6 million shares traded against Sh413 million on five million shares traded on Friday. The NSE 20 share Index, lost a further 30.04 points to close the day at 5,633.61 points.

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