Airtel stock subdued in debut week

Airtel Uganda’s debut week on the Uganda Securities Exchange was subdued, with minimal trading activity in the telecom’s shares, in line with the tepid interest in its initial public offering and the typically low trading volumes on the local bourse.

There was little demand for Airtel’s stock during the week, with no bids placed, although there was no shortage of offers from IPO investors looking to cash in their bonus shares. At the close of trading on Friday, the value of shares traded in the company since its debut on Tuesday was Shs1.8mn, out of a possible Shs278.3mn (the total value of shares available for trading — we arrived at this figure by multiplying the daily number of shares offered by the share price; some offers may have been repetitions, so the figure may be lower). The share price was unchanged at Shs100, the IPO price.

Airtel raised Shs211.4bn ($56mn) in its flotation by selling only 54.45 per cent of its offer shares – although this includes stock awarded as part of its listing incentives. The company had offered 20 per cent of its total stock in the listing, valuing it at Shs4tn ($1.1bn). The London-listed Airtel Africa plc – controlled by India’s Bharti family – retains an 89.1 per cent stake.

But lest we forget, the IPO, even after a two-week delay, was destined to be an even bigger disappointment until the state pension fund, the National Social Security Fund, stepped in on the last day. The fund announced on that it had bought 52.75 per cent of all shares on offer, or 10.55 per cent of the company, the significance of which was not fully realised until Airtel later announced that other bids represented only 1.7 per cent of the float. NSSF, it’s worth noting, was the sole institutional investor in the IPO.

Read: NSSF buys 10.55% stake in Airtel as part of IPO

Airtel’s IPO had to contend with the pessimism that investors in the formal financial sector — a small proportion of the population — have about equities. That is, if they have enough information about how to invest in them — otherwise they prefer options that offer more frequent returns, and the perception that they are not as profitable as other options is also hard to shake.

IPO prices are usually set conservatively to give an offering a good chance of success, and can in most cases be adjusted downwards in the event of poor performance. Airtel and Absa, the underwriter, could have chosen to lower the price, but they probably realised that doing so would have little impact.

It is safe to say that the low demand during the IPO did not raise expectations for the stock when it opened on the USE. Some investors may also interpret the lack of interest as a lack of confidence in the company’s potential and are being cautious. However, the illiquidity of the USE means that there is very little data to draw from, making it tricky to accurately assess the stock’s prospects.

Weekly market recap

MTN Uganda was the most traded stock by volume, with total trades of Shs141.7mn during the week (it was also traded every day). It was followed by Stanbic Uganda Holdings with trades worth Shs94.5mn, Bank of Baroda with trades worth Shs23.3mn, and Airtel Uganda with trades worth Shs1.8mn (see table for other trades). British American Tobacco, Dfcu, and Uganda Clays did not trade during the period.

Bank of Baroda shares fell 6.7 per cent, while National Insurance Corporation, MTN Uganda and Umeme Limited fell 1.6 per cent, 0.1 per cent and 0.02 per cent respectively. MTN’s share price fluctuated three times during the week, from Shs171 to Shs170 on Tuesday, recovering to Shs171 on Thursday, before closing at Shs170.75 on Friday. Prices of other stocks remained flat.