The Nairobi Securities Exchange (NSE) has been under the prolonged pressure of a bear run, that has resulted to a significant downturn in stock prices.
This downturn has prompted three companies, including Credit Bank, to defer their plans to list o the exchange due to concerns over potential undervaluation of their shares amidst the current market conditions. The bearish trend has not only affected well-established companies like Safaricom, KCB Group, and East African Breweries Plc(EABL) but also newer entities seeking to enter the market.
Traditionally, companies prefer to go public during bullish periods, allowing them to leverage premium valuations and offer shareholders the promise of stable or rising paper wealth upon listing. However, the prevailing bear run has cast doubts on the advantageous timing for ne entrants.
Credit Bank, associated with the Simeon Nyachae family and boasting a 27.1% ownership by the late politician’s family through Sansora Group of Companies, had intended to raise a minimum of KES 1 billion through its listing on the main segment of NSE.
The move was anticipated to break the listing drought that has gripped the exchange since 2014 when the bourse operator self-listed. The decision to halt listing plans is not isolated to Credit Bank alone, two other unnamed companies in the food processing and mining sectors have also paused their listing intentions, citing the diverse market conditions as a reason for their postponement.
the Chief Executive of the Capital Markets Authority (CMA), Wycliffe Shamiah, highlighted the concerns of these companies, emphasizing how the decline in the values of listed securities has influenced the decisons. ” Factors such as the cost of listing, tax implications, and the unpredictable business environment have contributed to the apprehension among potential listing,” he said.
While Credit Bank affirms its commitment to eventually listing, the current scenario, underscores a broader issue plaguing the NSE , with the recent delisting and suspension of companies, such as the upcoming exit of property fund Ilam Fahari I-Reit, the challenges facing the exchange become more evident.
NSE Vice Chairman, and Chief Executive of AIB-AXIS Capital Ltd Paul Mwai, highlighted the impact of depreciating currency and unavailability of dollars as substantial barriers to foreign investor participation.
As the bear run persists, stakeholders are closely observing market dynamics hoping for a reversal that could revive investor confidence and pave way for the prospective listings. Until then the decision by the three companies remain a testament to the formidable challenges posed by the current market conditions.