MTN AND THE SHORT VERSUS THE LONG VIEW

Last Monday telecom company MTN opened the sale of 20 percent in itself to the general public.

The sale or Initial Public Offer (IPO) will last till 22 November 2021, during which it is expected about 4.5 billion shares will be sold to the general public. Each share goes for sh200 and 500 are the minimum number shares one can apply for.

"MTN has thrown in a further sweetener, that if you buy the shares using your MTN number you get a bonus ten shares for every 100 shares. If you buy via other means – direct through the brokers with payment done in cash or through the banks, you get an additional five shares for every 100 you buy.

This amounts to a five to ten percent discount on every share you buy...

Shares will go on sale on the Uganda Securities exchange (USE) on 6 December 2021.

Since the opening of the sale of shares the chattering masses have gone into overdrive, analyzing the share issue, nine times out of ten without even looking over the 90-page prospectus, available to all online.

So to that extent you can imagine what the quality of discussion was, showing how financially illiterate we generally are.

For one thing people cannot make the distinction between an investor and a trader, therefore arguing at cross purposes.

While both are looking to preserve capital the trader is looking to make quick gains due to price fluctuations, while the investor is looking to buy into a durable company that can be held for longer periods benefitting from dividends and capital gains – price increases in the share price over longer periods. The two have different mindsets on the same issue.

So the argument tended to take the tone of there is no short term gains to be made in the offer versus those looking to longer term gains and arguing there is good value in the offer.

Even among the latter group there was some disagreement about whether there is scope for long term gain or not.

"It was like a sprinter arguing with a marathon runner about what the average speed is ideal to win a medal. On the surface of it the argument should not arise...

It was also interesting how we suddenly had a proliferation of stock analysts. As of last week there were 40,000 Securities Central Depository (SCD) accounts – many of whom have come on board in recent weeks due to a recent initiative to make it easy to register online and using mobile phones. The SCD account allows one to trade on the Uganda Securities Exchange (USE).

Given those few SCD accounts as a proportion of the national population or even the population of Kampala, who are all these authorities jumping out of the woodwork?

But it was an interesting study in investment psychology. You know how it is, you put your money together and decide to open a shop. There is something to say about consulting widely but anyone who has committed his funds to any enterprise knows how you will mostly get negative feedback, the shrillest from those who have never opened a shop.

"It is a human condition and not only peculiar to Uganda. That is why 90 percent of any population’s wealth is controlled by five percent of those populations. This small number are the ones who can break above the chatter and do what the majority are not willing to do to succeed...

It’s the same way MTN took a chance on Uganda – their first market outside South Africa, when we had a per capital GDP of less than $300 and other investors thought Uganda could not sustain a mobile phone market.

Twenty-three years later as a $1b-plus company, MTN is coming to the market. They have done all the heavy lifting and been paid handsomely for it, so we are being offered the finished product with a lot of the startup risks managed. The company has not reached its peak, if the experience of Safaricom in Kenya is to be referred to, so there is still a lot value to be created and shared with new shareholders.

Risks still abound and to the extent that they can MTN has outlined them in the prospectus.

There are no sure deals in life. In Uganda only death is for sure. Investors in the new MTN offer will hopefully appraise themselves of all the risks and if they think they can stomach the risk they will buy shares if not they will wait for the next deal.