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.
