40 billion Stanbic bonus shares to spur liquid market

By David Mugabe

Liquidity or availability of tradable shares is expected to rise with the loading of an additional 40 billion Stanbic shares on the Uganda Securities Exchange over the weekend.

This is the second corporate action from the bank following the 2011 bonus share. Stanbic is moving to fulfill the new minimum capital requirements by the Central Bank that all banks must raise their capital to sh25b by 2013.

The money raised will be more than the sh25b required by the Central Bank, but according to Stanbic, having extra capital helps the institution to absorb shocks.

“The additional shares are issued at no fee. We strive to be profitable, but also to be able to grow the economies in which we operate,” said Stanbic managing director Philip Odera at the listing in which five billion shares were immediately made available for trading.

The development brings to 51.2 billion total Stanbic shares on the Uganda Securities Exchange (USE). Odera said the bonus share offer is an inclusive process that allows local investors to tap into the available local resources.

“There is an opportunity for all of us to participate. You do not have to have a fortune,” said Odera.

When trading opened on Thursday morning, the share price shot up to sh30, from an average of sh25.

According to Joseph Kitamirike, the USE chief executive, the bonus share offer means a shareholder who previously had one share now has four shares in the 1:4 ratio, although the value of the share, does not change.

Odera said shareholders are then effectively more empowered to go to the market more regularly.

“Extra 40 billion shares will encourage more trading. Those extra shares support our business,” said Kitamirike.

But the investing public has been slow in opening securities central depository (SCD) accounts, which is a new requirement for trading.

According to Kitamirike, only about 35% of investors or people who own shares have opened SCD accounts, more than a year since the project was launched.

About 13,000 SCD accounts have been opened in total, mostly among Stanbic shareholders.

“There are still many shareholders holding paper certificates,” said Kitamirike.

Stanbic shareholders will still hold rights to the additional shares, but this can only be transferred to them if they open SCD accounts.

Kenneth Kitariko, the chief executive of African Alliance, who are the transaction advisors, said most of those yet to open SCD accounts are in Kenya.