Quickmart IPO: Who is next?

Kenya Pipeline Company Ltd's Initial Public Offering (IPO) is still hot, with the price frozen around Sh9, its original price. Not much movement, and not so surprising. The fact that institutional investors largely bought into this firm could explain its price stability; the speculators are “drowned.” The price behaviour mirrors Safaricom in its early days after the IPO. When are we getting the rest of the IPOs as promised by the Kenya Kwanza government in 2022?

We now have two other IPOs. Dangote oil refinery in Nigeria and Quickmart supermarket.  We hope to soon buy the shares of the Lamu Oil refinery, not yet operational, more like off-plan houses.

We shall be buying into the future, to refine oil, add value to it as fuel and petrochemicals.

The proposers of the Lamu oil refinery don’t want to hear of climate change, renewable energy, electric cars and the possibility of the planet running out of oil.

Buying into the Nigerian Refinery IPO at about Sh49.50 is not that straightforward; the 195-page prospectus says as much: “investors outside Nigeria may participate in the offer to the extent that such participation is permitted under the laws and regulatory requirements applicable to them.” That is why we are buying through global deposit receipts, and after regulators made some changes.  The Nigeria refinery board is diversified, with Aliko Dangote and his daughter as members. Is Sh49.50 the best price? Let us wait and see. Is the IPO period from September 14th to October 13th not too short? Are you buying?

What about the Quickmart Initial Public Offering (IPO)? It has had less publicity compared with the refinery, and the price is lower or affordable at Sh7.50 a share, counterbalanced by the number of shares on offer: two billion.  It’s curious how we love Mart as part of our supermarket names, a legacy of USA-based Walmart. We had Nakumatt and many other marts.

Back to Quickmart. We have a track record of its sales, locations and possible future, and most likely have shopped there. That is a big attraction. We can compare it with similar supermarkets.

The benchmark is Naivas. It’s also interesting how supermarkets start in the medium-sized towns before heading to Nairobi. This is a great strategy: grow without attracting lots of attention and scrutiny, then land in Nairobi, a bigger market.

Nakumatt from Nakuru, Naivas (from Naivasha) and now Quickmart, with a more neutral name but from Nakuru. Why are Nakuru and Naivasha crucibles of entrepreneurship? Could it be their cosmopolitan nature and not being far away from the capital city? Do they spawn other businesses beyond supermarkets?

Scale matters; no wonder no marts come from small towns like Shamakhokho, Wìyùmìrìrie, KwaWanzilu, Kianjukuma, and Sindo, among others. You can coin supermarket names from these town names, e.g Khokhomart?  When it comes to business names, we love exotic names, either from movies or media.

But in central Kenya, they have a strange way of “combining names, Examples include Jacter for Jackson and Teresia, and Elper for Elias and Perpetual. Add Muthokinju.  Add to the list as you drive through the central region.

Why IPO for Quickmart? That will give it more capital to expand, more goodwill and publicity while bringing in professional managers. The listing rules mean the supermarket will be “naked”; data on its performance will be public.

Such publicity will lead to better decisions, growth and more money for shareholders. While the pride of ownership is a factor in buying into IPOs, money is a more compelling factor, either through speculation or dividends.

Some IPO buyers want to cash in on the price rise after the IPO. The problem is predicting the price direction after the IPO. How many people want to sell? Want to buy? Is all the information about the firm known by the IPO?

We hope Quickmart will expand to neighbouring countries and beyond. That will become a source of national pride. Americans take pride in their Coca-Cola, Boeing, JW Marriott, Caterpillar, just like Japanese and their Toyota, Sumitomo, Sony or Canon.

Why do Japanese use neutral names like Sony, Canon or Uniqlo? We too would love seeing our Equity, Quickmart or KQ (Kenya Airways) beyond borders, “Ile yetu.”

Floating Quickmart is fascinating for another reason. It’s a home-grown company, a testimony: “we can do it.” A testimony that the invisible hand of the market can work, that our entrepreneurs have come of age, just like Dangote. Who is next after Quickmart? Food for thought: would listing have saved Tuskys and Nakumatt?

As Kenya dreams big economically, we need to focus on a few niche areas and fly with them. Banking, fintechs, retailing and tourism. We can’t do everything.

One question many are shy of asking is whether this is the best time for IPOs, the penultimate year to an election.

Whatever the timing, the IPOs have brought some excitement and are a good distraction from perennial politics. Buying into the Dangote refinery? Quickmart? Why or why not? Let us talk.