New Vision rights issue to conclude in only 9 weeks
Mar 02, 2008
<b>Paul Busharizi and Sylvia Juuko</b> talked to <b>Jimnah Mbaru,</b> the chairman and CEO of Dyer& Blair Investment Bank, who was in Kampala to endorse his firm’s agreement to handle The New Vision’s rights issue.
Paul Busharizi and Sylvia Juuko talked to Jimnah Mbaru, the chairman and CEO of Dyer& Blair Investment Bank, who was in Kampala to endorse his firm’s agreement to handle The New Vision’s rights issue. Below are excerpts.
QUESTION: What happens after the signing of the agreement?
ANSWER: We will come out to set up a team to look at the books of the company.
The team will prepare the information memorandum and liaise with the Capital Markets Authority (CMA) and Uganda Securities Exchange (USE).
Then they will come up with a timetable of the events up to the day the shares are listed on the stock exchange.
QUESTION: What would be the time frame for these transactions?
ANSWER: Generally these transactions take a maximum of 90 days.
This being a company listed on the stock exchange, we should be able to do it in a shorter period... about nine weeks.
QUESTION: We have seen the share price of The New Vision almost quadruple in the last five months following announcement of the rights issue and expansion plans. Is this is a normal trend?
ANSWER: Traditionally there is some kind of movement that generally is not upward.
If the price has moved upwards, the main reason is that the profitability of the company must be going up.
The investors must be appreciating how this money will be utilised.
This means investors are appreciating the new direction in which the company is moving particularly towards electronic media in terms of income from advertisement.
Generally prices do not respond to rights issue or bonus issues. If they do it’s because the company is doing well.
QUESTION: What happens if shareholders can’t exercise their rights for those shares?
ANSWER: When existing shareholders do not want to exercise their rights, we create a secondary market for those who want to buy those rights in order to subscribe for those shares.
So in the secondary market on the stock exchange, there will be a secondary market for the rights issue.
So it’s not just the share prices listed on the stock exchange but also have rights issues on the stock exchange for a short period of time.
If there are no buyers of the rights issue and the company wants to raise money, the best way is to get an underwriter.
QUESTION: The Nairobi Stock Exchange (NSE) has been volatile in the last two months because of the chaos from the elections. Will we see some calm return to the market?
ANSWER: The stock exchange in Nairobi has experienced volatility because of the political uncertainty and also because of the violence that followed the general elections.
Prior to the elections, the stock market had reached a peak.
The index was at 5,000 but immediately after elections, the index dropped by 20% in January to about 4,600.
After the Koffi Annan initiative started showing signs of bearing fruit, the market started recovering not just in terms of the price but also the volumes.
The index is around 4,900 and its recovering.
We did a turnover of Ksh2.2b yet in January we had 248m.
It’s responding slowly and if we have a break-through, we think the market will recover within less than six months.
QUESTION: Not having much foreign participation in the NSE has cushioned the market. Is that a fair assessment?
ANSWER: That is true. The absence of foreign investors on a large scale also helped because foreign investors tend to be very fickle.
However, we have a different kind of foreign investor who is not a speculator, or a short-term investor but one who is taking a long-term view.
Those types of investors are the ones we are starting to see in our market and very soon we will see them here in Uganda.
These ones don’t get scared but take a long-term view. We are also seeing a new investor in form of private equity funds.
QUESTION: What happens after the signing of the agreement?
ANSWER: We will come out to set up a team to look at the books of the company.
The team will prepare the information memorandum and liaise with the Capital Markets Authority (CMA) and Uganda Securities Exchange (USE).
Then they will come up with a timetable of the events up to the day the shares are listed on the stock exchange.
QUESTION: What would be the time frame for these transactions?
ANSWER: Generally these transactions take a maximum of 90 days.
This being a company listed on the stock exchange, we should be able to do it in a shorter period... about nine weeks.
QUESTION: We have seen the share price of The New Vision almost quadruple in the last five months following announcement of the rights issue and expansion plans. Is this is a normal trend?
ANSWER: Traditionally there is some kind of movement that generally is not upward.
If the price has moved upwards, the main reason is that the profitability of the company must be going up.
The investors must be appreciating how this money will be utilised.
This means investors are appreciating the new direction in which the company is moving particularly towards electronic media in terms of income from advertisement.
Generally prices do not respond to rights issue or bonus issues. If they do it’s because the company is doing well.
QUESTION: What happens if shareholders can’t exercise their rights for those shares?
ANSWER: When existing shareholders do not want to exercise their rights, we create a secondary market for those who want to buy those rights in order to subscribe for those shares.
So in the secondary market on the stock exchange, there will be a secondary market for the rights issue.
So it’s not just the share prices listed on the stock exchange but also have rights issues on the stock exchange for a short period of time.
If there are no buyers of the rights issue and the company wants to raise money, the best way is to get an underwriter.
QUESTION: The Nairobi Stock Exchange (NSE) has been volatile in the last two months because of the chaos from the elections. Will we see some calm return to the market?
ANSWER: The stock exchange in Nairobi has experienced volatility because of the political uncertainty and also because of the violence that followed the general elections.
Prior to the elections, the stock market had reached a peak.
The index was at 5,000 but immediately after elections, the index dropped by 20% in January to about 4,600.
After the Koffi Annan initiative started showing signs of bearing fruit, the market started recovering not just in terms of the price but also the volumes.
The index is around 4,900 and its recovering.
We did a turnover of Ksh2.2b yet in January we had 248m.
It’s responding slowly and if we have a break-through, we think the market will recover within less than six months.
QUESTION: Not having much foreign participation in the NSE has cushioned the market. Is that a fair assessment?
ANSWER: That is true. The absence of foreign investors on a large scale also helped because foreign investors tend to be very fickle.
However, we have a different kind of foreign investor who is not a speculator, or a short-term investor but one who is taking a long-term view.
Those types of investors are the ones we are starting to see in our market and very soon we will see them here in Uganda.
These ones don’t get scared but take a long-term view. We are also seeing a new investor in form of private equity funds.