Kenya Pipeline IPO shares to be allocated pro rata, advisor says

Allocation of shares in the Kenya Pipeline Company (KPC) Initial Public Offering (IPO) will be on a pro rata basis, meaning that late bidders will still have a chance to receive shares. This allays fears that late comers into the bidding will miss out.

Dr Kenne Belgrade of Faida Investment Bank, the lead transactional adviser for the KPC deal, says the one-month period given for the IPO is meant to allow purchasers to arrange for financing.

While this hints to a possible oversubscription, he says the timelines are necessary for all participants to be have a fair chance to own the state-run company.

KPC’S IPO was launched on January 19, and closes on February 19. During this period, the public has a chance to buy a piece of the company before it goes public from March 9.

Belgrade says considering KPC is set to be the major listing on the Nairobi Securities Exchange (NSE) in almost two decades, there is expectation of the public flooding the capital markets. He describes the expected listing as an opportunity to deepen and widen the capital markets.

While the KPC IPO Information Memorandum provides for a possible shortening or extension of the offer period, he says it would be unfair for the process to close once the bidding hits its intended target.

“You can think of the Wanjiku or Otieno making arrangements for financing knowing that we have opened the offer for 30 days, then we go behind (them) and say ‘because we have reached our target, let us close and move on. It would be unfair,” he said during a session with journalists.

He added: “As much as the information in the memorandum actually speak to an event of extending of shortening the offer period, we strongly believe by design, as you can see, we are pro rata, not first come first served.”

In pro rata, shares will be allocated fairly to ensure no one is locked out as long as their application is valid. In first come first served, priority is given to those who are prompt with the offer.

The Information Memorandum further indicates that the dates provided may be subject to change prior to approval of the Capital Markets Authority (CMA).

“The officer period may be extended or shortened subject to approval by the CMA,” it adds. The 11.8 billion shares issued by the National Treasury, who is the sole shareholder of KPC, is expected to fetch Sh106.3 billion. The 11.8 billion ordinary shares represent 65 per cent of the company.

These shares will be shared among Kenyan retail investors (the ordinary Wanjiku and Otieno) who will be allocated 20 per cent, Kenyan institutional investors (20 per cent), KPC employees (five per cent), investors from the East African Community (20 per cent), oil marketing companies (15 per cent) and foreign investors (20 per cent).

“All valid applications will be considered,” said Belgrade. He said it does not matter if you come first or last. At close, the applications will be reviewed and in the event of an oversubscription, they will be prorated.

“We have given 30 days because we believe certain investors may be working around that particular calendar in terms of financing arrangement,” he said.

Belgrade noted that they are avoiding a situation where these particular investors are caught off guard in the event the offer was to close earlier.

“We are happy to wait for those 30 days and enable as many Kenyans as possible to participate,” he said.

KPC says in the IPO Information Memorandum that the allocation policy has been developed in line with the requirements of the Capital Markets (Securities) (Public Offers, Listing and Disclosure) Regulations, 2023.

“These regulations require an issuer to establish and disclose in the Information Memorandum, a fair and equitable allocation policy for the distribution of securities in a public offer. Accordingly, the Company’s allocation policy is designed to ensure transparency, fairness and compliance with the prescribed share ownership and allocation standards,” reads the document.

It adds that the vendor wishes to achieve a balanced distribution of the offered shares between institutions, companies and individual members of the public in addition to ensuring that employees of KPC participate in the Offer.

“During the Offer Period, an applicant will be able to increase the number of shares they have already applied for, by dialing the code and choosing the Add Shares Option,” the document says.

Applicants have an option of making partial payments for the applied shares until the amount is fully paid up. However, this should be done before the close of the offer period.