Is the Airtel Uganda IPO Viable?

Airtel Uganda’s initial public offering (IPO) has attracted little attention on the local stock market. Most of this has been blamed on weak publicity about this offering, which, I for one believe, is a viable option for investors, with a possibility of earning them millions of shillings down the road.

The IPO was rolled out on August 30 after a 12-month delay. The managers blamed this on weak economic conditions in the Ugandan economy.

I have been made to believe that the Airtel team was prompted into taking this step during this material time due to the fact that the law says that all telcos should list on the Uganda Securities Exchange (USE) to increase citizens’ share of industry profits after years of revenue growth. This period had expired, so, Airtel had no other option but to front its offering.

Airtel Uganda’s shares are being sold at Sh100 ($0.02) each, with eight billion ordinary shares available for sale. These are equivalent to 20% of the firm’s issued shares. This translates into a total IPO value of sh800b ($213.7m). This is a bit on the higher side.

Although I believe they are a best buy, many Ugandans may not be able to purchase them dsuring this material time due to the prevailing harsh economic conditions.

Many people usually utilise fresh cash to buy shares during IPOs. But many prospects are wary of taking up debt in order to access these shares. Because of the economic downturn, there is fear that they may default on their loans.

But the fact of the matter is that most of the transaction activity in local IPOs happens in the last weeks of the offer period. Now that the offer period has been extended, there might be positive movements on counters.

Going by the records, the Airtel IPO has achieved less than ten percent uptake compared to the MTN Uganda’s IPO two weeks after its launch.

MTN issued ordinary shares worth Sh895b ($239m) during the Covid-19 lockdown period. These were sold at Sh200 ($0.05) each. So, no one can dare say that MTN shares were issued under a better economic dispensation.

Although the Uganda Government’s policy on mandatory listing of telecommunications companies has created an appetite among the locals to buy into the multinationals, many need to be educated on the long term benefits of buying and holding shares.

The appetite just has to grow, if the telecoms are to make a killing. So far this has not happened. This requires all the well-wishers to keep their fingers crossed

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