Archive for the 'Stock Exchanges' Category

Fund managers seek good governance

Governance, good regulation and availability of market data and prices help African fund managers decide on investing into other African markets, according to a survey of 50 African asset-managers for the African Exchanges Linkage Project (AELP) project. Key factors when they choose new markets are: market regulation (91% of replies), followed by investor regulation and availability of market data and prices (90% each).

Other top criteria that help fund managers choose where to invest are: levels of dealing price, efficiency of execution and commission (86%), the quality of companies and investment opportunities (also 86%), corporate, social and governance criteria (84%) and availability of research (80%). Three quarters of investors said they were reluctant to invest in small and illiquid markets or where valuations are excessive. Only half decide to invest in a company based on its dividend policy, while valuation and governance are the top factors.

Comments from asset managers interviewed for AELP Buy-Side survey

Asset managers in Nigeria and the francophone West African countries are the most optimistic about prospects for Africa’s economies. In the AELP poll, some 97% of the surveyed Nigerian asset managers are optimistic about the continent, with average assets of $364 million under management, followed by 85% of surveyed francophone asset managers, who averaged $416 million of assets managed. Average across all the survey respondents, including a couple of South African managers, was $4.1 billion in assets under management.

Optimism is also strong among asset managers surveyed in Mauritius (80% optimistic), Morocco (73%), Nairobi and Egypt (each with 65% of responses optimistic). Nearly half (46%) of respondents manage assets with investment horizons over five years, another 23% for three to five years.

“The results of this survey confirm the high level of professionalism of African fund managers using world-class standards and criteria in their decision-making. This is really reassuring for the success of the AELP initiative,” says Dr. Edoh Kossi Amenounvé, President of ASEA.

The poll evaluates the appeal of different investment markets in the AELP, which brings together seven leading African securities exchanges to boost trading, investment and information links. AELP is procuring a technology platform to link stockbrokers, so that a broker on one exchange can send investors’ orders to an executing  broker on another exchange for execution.

The AELP is a joint initiative by the African Securities Exchanges Association (ASEA) and the African Development Bank to unlock pan-African investment flows, promote innovations that support diversification for investors, and address depth and liquidity in the markets. It is funded by the Korea-Africa Economic Cooperation (KOAFEC) Trust Fund through the African Development Bank.

The AELP exchanges are: Bourse Régionale des Valeurs Mobilières (BRVM, integrating eight West African countries), Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange, The Nigerian Stock Exchange and Stock Exchange of Mauritius.

Cross-border trading between the seven markets totalled $1.1 billion in 2019, and was at over $500 million in the first quarter of 2020, according to the participating markets. The “African Listed Securities” assets across these exchanges offers equities investments in more than 1,050 companies, including Africa’s most promising, profitable companies and global leaders. Investors will also buy or sell bonds, exchange-traded funds (ETFs) and derivatives if they are listed on the participating Exchanges.

ASEA supports African economic integration and the African Continental Free Trade Area. The AELP will promote free movement of capital and investment.

About ASEA

The African Securities Exchanges Association is the premier association of the 25 securities exchanges in Africa who have come together with the aim of developing Member Exchanges and providing a platform for networking. ASEA was established in 1993 and works closely with its members to unlock the potential of the African capital markets.

Vision

To enable African Securities Exchanges to be key significant drivers of the economic and societal transformation of the year 2025.

Mission

To provide a forum for mutual communication, exchange of information, co-operation and technical assistance among its members, to facilitate the process of financial integration within the region for the effective mobilization of capital to accelerate economic development of Africa.

Zambia Forest lists on Lusaka Securities Exchange

Zambia Forestry and Forest Industries Corporation PLC today (12 February) brought welcome relief to the Lusaka Securities Exchange when it broke a 6-year listing drought. The listing was for the full 400 million shares, after an offer of 160m shares (40%) at ZMW2.06 each to raise ZMW330m ($22.5m). The forestry firm will use the proceeds from selling 70m of these shares for working capital, expenses and capital spending.

Zaffico is the biggest company in establishing, managing and selling exotic roundwood in Zambia and manages 51,659 hectares in pine and eucalyptus plantations plus some 50,000 hectares of unplanted land. It sells mature trees harvested as well as poles for transmission, fencing and construction.

According to the prospectus, dated 6 December, the total share offer included a sale of 90m shares from Zambia’s state-owned Industrial Development Corporation (IDC). The offer opened on 11 December. The sponsoring broker is Pangaea Securities. It was the LuSE’s first public offer and listing in 6 years since Madison Financial Services in mid-2014. The share offer was extended by 8 days but closed on 29 January.

In the financial year 2018, Zaffico’s revenue was ZMW244.7m (up from ZMW208.2m in 2017), earnings before interest, tax, depreciation and amortization (EBITDA) was ZMW163.5m (ZMW148.2m) and net profit was ZMW119.6m (ZMW114.5m). Zaffico has also been authorized to sell confiscated rosewood mukula logs and logs harvested before harvesting mukula was banned. In August 2019 it was reported that the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) had decided to include mukula trees in its Annex II listing. Rosewood has a high value in China for making furniture and is being widely harvested across Africa while Zambia has imposed bans and lifted them from time to time (Lusaka Times estimates that some $2bn of mukula revenue was stolen by a cartel).

Nigerian Stock Exchange launches SME Board

Photo credit: Nigerian Stock Exchange

Dynamic Nigerian entrepreneurs are in focus after the Nigerian Stock Exchange launched a growth board for fast-growing small and medium enterprises (SMEs) to help  businesses raise long-term risk capital and grow.

At the 29 January the bourse outlined the services on offer for businesses in the growth cycle. Services offered include: pre-listing diagnostics, institutional services (such as audit, financial advisory, legal advisory, corporate strategic advisory), investor relations, analyst coverage, corporate access and corporate governance.

According to the press release , Oscar Onyema, OON, CEO of the exchange told of collaboration at the launch: “We have partnered with relevant stakeholders to design a suite of cost-effective services to give listed companies a competitive edge within their respective industries while stimulating investors’ interest through enhanced information delivery.”

The new board has Entry Segment for companies with market capitalization from ₦50m ($136,000), compared to Standard Market for companies with market capitalization from ₦500m. Investors choose segments according to their investment preferences.

There other boards include the Main Board for well-established companies with a track record of commitment to high standards of disclosure and corporate governance. The Alternative Securities Market (ASeM) focuses on small to mid-sized companies. The Premium Board was added in August 2015 for companies that meet the most stringent listing criteria of capitalization, corporate governance and liquidity and aims to provide a platform for greater global visibility to attract global capital flows and reduce the cost of funding. 

Mr Onyema outlined the contribution of SMEs to jobs and growth in Nigeria: “SMEs have contributed about 48% of the national Gross Domestic Product (GDP) in the last 5 years, according to the Nigeria Bureau of Statistics. This segment of the economy also accounts for 96% of operational businesses and 84% of employment.

“Despite these significant contributions, SMEs face significant challenges, including lack of right-sized and right-priced financing. With the launch of the Growth Board, the Exchange is, therefore, offering issuers relaxed entry criteria as well as less stringent ongoing listing requirements to allow for greater accessibility to finance, global visibility and credibility through corporate disclosures.”

SEC Nigeria clears Nigerian Stock Exchange demutualization

Next step in the long demutulization of Nigerian Stock Exchange will be a court ordered meeting and an extraordinary general meeting. The demutualization is set to transform another of Africa’s most dynamic exchanges.

Last month (January 2020)  the bourse received a letter from the Securities and Exchange Commission Nigeria with “no objection” to its planned conversion from a not-for-profit entity limited by guarantee into a profit-making, public limited liability company owned by shareholders.

Oscar Onyema, CEO said (in a press release): “With this consent, the Exchange will proceed quickly to the next phase of holding a Court Ordered Meeting and an Extraordinary General Meeting to pass requisite resolutions including the approval of the draft Constitution; basis of allotment and split of shares between members; approval of new Board of Directors; and approval of new corporate governance and regulatory structures.”

In March 2017 the Members of the Exchange passed resolutions that authorized the Council and Management to proceed with the process. President Muhammadu Buhari signed the Demutualisation of The Nigerian Stock Exchange Bill into law on 29 August 2018, authorizing NSE to convert to a shareholder-owned public company limited by shares.

Seychelles MERJ Exchange IPO closes 28 Feb

The MERJ Exchange, the national securities exchange of Seychelles, has extended its $4 million initial public offer (IPO) to 28 February in the form of tokenized shares. The exchange already listed the tokens on itself by introduction on 7 August 2019 and opened the IPO on 10 September.

The exchange, previously known as Trop-X, says it is the world’s first fully regulated exchange that can handle both securities and digital assets, has a fully regulated post-trade processing infrastructure and works with a central clearing model. It operates a stock exchange for equities, debt and derivatives and says it will be first global market to offer the full cycle in primary and secondary markets in digital assets.

At the time of issuing the prospectus (27 August 2019) the bourse had 31 listed equities and 2 debt issues with market capitalization of $382.7 million. There were 3 members and 5 listing sponsors.

The MERJ Exchange shares are tokenized into digital assets. The offer is for tokens representing 1,652,893 securities at $2.42 per share, to be traded in USD. This will be 16% of the total shares if issued in full giving a valuation of $25m for the exchange. The minimum raise for the IPO to go ahead will be $500,000, the minimum subscription per investor is $2,000 (826 shares) and $10,000 (4,132 shares) from within the USA.

MERJ Exchanges plans to spend the offer proceeds on IT advisors and consultants, increasing its staff and marketing.

The total share capital is 15 million ordinary shares with a par value of $0.03 each. This has been tokenized to 8,684,207 tokenized shares which are currently listed.

It is starting to attract international partners including Jumpstart Securities in the US and Globacap in UK for the offer. The sponsor advisor for the offer is PKF Capital Markets (Seychelles) Ltd.

According to the investment deck (available here), it has big plans to increase the number of issuers from the current 33 to 111 by the end of year 2, boost the total market capitalization (already $1 billion according to a January 2020 newsletter) and increase the number of sponsors and brokers, as well as liquidity. It will cut trading fees from current 0.5% to 0.15% and have a capital raise fee of 0.3%.

MERJ aims to position itself as a key regulated system as blockchain technology transforms the way the world delivers value, including tokenization of illiquid assets including real estate, shares in small and medium enterprises (SMEs), copyrights and collectables such as art. It hopes to take on global incumbent exchanges which have legacy structures and stakeholders that are not yet ready to tackle the change.

From MERJ Exchange investment deck

The exchange was incorporated in 2011 as Trop-X (Seychelles) Ltd, received its licence to operate the Seychelles Securities Exchange in June 2012 and went live in August 2013 with the first equity listing. It became the national numbering agency and launching debt and derivatives exchanges in 2014. It listed its first Eurobond in 2016 and started working on the digital asset project with the Ethereum Alliance. It changed name in December 2018 and did its first tokenized listing, of its own shares, on 7 August 2019. Operational partners include Euroclear and Strate in its partners.

Ed Tuohy, CEO of MERJ Exchange, says in the investment deck: “MERJ has spent years establishing the infrastructure, the regulatory licences and the technology. We can now move decisively.”

According to the deck: “MERJ enjoys a number of key structural and organisational advantages which put us firmly ahead of the competition. These are: vertical integration, regulatory approval, agile organization, respected jurisdiction, live and operational, direct access platform.” The structure is MERJ Exchange Ltd and 2 wholly owned subsidiaries, MERJ Clearing and Settlement Ltd and MERJ Depositary and Registry Ltd.

The regulator Financial Services Authority Seychelles is an associate member of the International Organisation of Securities Commissions (IOSCO) and meets similar regulatory standards as all global regulators. MERJ is an affiliate member of the World Federation of Exchanges (WFE).

Seychelles is not listed on tax avoidance blacklists but is on the grey list of the European Union (with 31 countries including Namibia and Botswana) and Oxfam. By comparison Mauritius was removed from all EU lists in October 2019 but remains on the Oxfam grey list.

The Seychelles regulatory structure allows MERJ to integrate overseas organizations that are licensed and regulated in a recognized jurisdiction and there is no requirement that members have a presence in Seychelles.
It aims to provide seamless direct access for individual users using mobile and web apps.

For more information and to apply for the offer look at the MERJ Exchange website or the offer page on Globacap and US investors should speak to their broker.

NOTE: This article does not constitute investment advice, the purpose is news information. The writer is not affiliated to MERJ Exchange. Read the full prospectus, available here.

Nairobi opens second derivatives market in sub-Saharan Africa

Nairobi Securities Exchange stockbrokers (photo credit: Nation Media Group)

The Nairobi Securities Exchange says the first trades on its new derivatives market NEXT went smoothly on 4 July, according to media reports. The NEXT market is set up to trade equity index futures and single stock futures. Initially trading is offered in 5 single stock futures and futures on the NSE 25 Index.

The NSE is the second exchange in sub-Saharan Africa after Johannesburg to launch derivatives trading. According to a Business Daily news report, this week’s launch is a soft launch restricted to a few investors, and the market will open to all investors after a week of trials.

Xinhua news agency reports a statement from NSE: “The NSE NEXT derivatives market has successfully conducted its first futures trades. The initial trades were executed by Standard Investment Bank and Kingdom Securities who cleared through the Co-operative Bank of Kenya.”

The market is mostly for individual and institutional investors looking to better manage risks, hedge, arbitrage and speculate over the future value of the participating stocks and the index.

Regulator approves

The Capital Markets Authority (CMA) regulator gave approval to the NSE to launch and operate the “Derivatives Exchange Market” in an announcement on 29 May. This paved the way for Thursday’s launch.

Paul Muthaura, CMA Chief Executive, stated: “‘The approval granted to the NSE to operationalize a derivatives market marks the achievement of a flagship project under the economic pillar of Kenya’s Vision 2030. The derivatives market will facilitate deeper and more liquid capital markets and position Kenya closer to becoming the heart of capital markets investment in Africa, as envisioned in the Capital Markets Master Plan”.

Other financial and commodity derivatives will be introduced later.

The launch follows a successful 6-month derivatives pilot test phase in July-Dec 2018, and resolution of key issues that arose. Stanbic Bank and the Co-operative Bank of Kenya have been approved by the banking regulator Central Bank of Kenya to provide clearing and settlement for the derivatives market.

NSE has been working with CMA and other stakeholders for years to prepare for the launch, as reported in this blog in December 2014.

What can you trade?

Investors are initially offered single stock futures targeting 5 liquid stocks: Safaricom, East African Breweries, Equity Holdings, Kenya Commercial Bank (KCB) and BAT. They can also trade equity index futures based on the NSE 25 share index, that represents the performance of 25 blue-chip listed firms. The index was launched by the bourse in October 2015 as part of preparations for the NEXT derivatives market.

Initially 7 stocks were targeted but the NSE requires that they have a minimum KES 50 billion ($487 million) market capitalization and minimum average daily turnover of KES7m.

According to a report on 4 July in Business Daily, state-run Kenya Electricity Generating Company (KenGen) with a market cap on 3 July of KES 39bn and Bamburi Cement (KES 41bn on Wednesday) have been excluded from futures trading after failing the minimum capitalization test.

The newspaper reports NSE chief executive Geoffrey Odundo’s statement: “All futures contracts listed on NEXT will have quarterly expiry dates; this will be the third Thursday of March, June, September and December of every year. All NEXT futures contracts will initially be cash settled.”

Trading fees have been pegged at 0.17% of the total value for single stock futures and 0.14% for index derivatives, compared to trading fees on equities ranging from 1% to 2%. According to an earlier Xinhua report, Rufus Kariuki, manager of derivatives at NSE, said that the derivatives will be settled at the end of each trading day to reduce risk of default by investors.

One contract will be equivalent to 1,000 underlying shares for stocks trading below KES 100 (Safaricom, KCB, Equity and KenGen), while for those trading above KES 100 (BAT, EABL and Bamburi), a contract will equal 100 underlying shares. One index point will equal KES 100 under NSE trading rules for derivatives.

The NSE has set aside KES 130m ($1.27m) for the settlement guarantee fund that will insure investors against counterparty default risk as part of preparations to operationalize the derivatives market.

The NSE expects derivatives trading will boost liquidity. There are 65 listed firms. Telecoms companies and banks are among the most heavily traded.

Africa issuers raised $341m in 6 months, down 28%

Enterprises based in Africa raised $341 million through equity issues in the first half of 2019, down 28% on the $472m raised in the first half of 2018. Law firm Baker McKenzie has published its Cross-Border IPO Index for H1 2019, using data sourced from Refinitiv, and says this was mainly because only $85m was raised from 4 initial public offers (IPOs) on African exchanges, down 80% from $419m from 4 IPOs in the first half of 2018.

The numbers exclude mega issues by Africa-focused issuers based outside Africa. These include $750m raised on 28 June by the IPO for UK-headquartered Airtel Africa (read about the slow first day) which operates in 14 countries; and $196m raised by pan-Africa e-commerce Jumia Group (headquartered in Germany) on the New York Stock Exchange in April, see our article about the share price performance since then. Jumia sells in 13 African countries and is top e-commerce website with over 15m monthly visitors in Nigeria.

Wildu du Plessis, Head of Capital Markets at Baker McKenzie in Johannesburg, says in a press release: “The drop in African IPO values in H1 2019 was mostly because of political and economic uncertainty on the continent. Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead. Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example, the so-called United States (US) China trade wars and the possibility of a “no deal Brexit” – both have the potential to impact African economies significantly.”

Egypt buzzing

Listing bell and trading floor of the Egyptian Exchange

Baker McKenzie says Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011. Growing confidence in economic policies introduced since the currency float has boosted the Egyptian Exchange (EGX) and is prompting companies to consider share sales.

In April Khalid Abel Rahman, Assistant Minister of Finance for Capital Market Affairs, said the Government was embarking on an IPO programme is to raise EGP100bn ($5.8bn). Mohamed Farid, Chairman of the Egyptian Exchange, said that three private companies expect to launch initial public offerings (IPOs) before the end of 2019,

Baker McKenzie says a large IPO is Carbon Holdings Ltd, expected to raise $250m by selling a 30% stake and listing in London and Egypt. The company has missed the Q2 timetable mentioned by Karim Helal, Managing Director of Corporate Finance and Investor Relations, in this article last September. EFG Hermes is acting as advisor and global coordinator for the IPO, Baker & McKenzie is local legal counsel, and White & Case is international counsel.

Another large IPO is expected from Banque du Caire SAE, owned by Egypt’s second-largest state-owned bank Banque Misr. The bank has announced it will offer a 20%-30% of its shares for sale through private placement and public offering. The offer is expected to raise $300m-$400m and is forecast to happen in Q3 or Q4.

Hard work in South Africa

Du Plessis warns that governance concerns held back capital raising in South Africa: “Capital raising has decreased substantially in recent years, also due to economic and political uncertainty. Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy. The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Du Plessis says.

Life returns in Nigeria

Du Plessis adds: “There are also signs of life returning to Nigeria’s capital markets. Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering”. Baker McKenzie’s recent Global Transactions Forecast predicts more IPOs in Nigeria in the next 3 years. “Hopefully this is the start of a long upswing in capital raising activity in the country,” says Du Plessis.

Not specifically mentioned was the $5.1bn listing of MTN Nigeria on the Nigerian Stock Exchange (see article), which is expected to be followed by a public offering of shares soon.

By sector (details from Baker McKenzie, Enko Capital and other sources)

Energy and power: South African company Renergen Ltd, which produces natural gas and helium, in an IPO in Australia offered 12.5m shares at AUD0.80 to raise AUD10m ($7m) for its Virginia Gas Project in South Africa. Financial: Banking group Oragroup listed on the Bourse Régionale des Valeurs Mobilières (BRVM) in April after a successful IPO in Oct-Nov 2018, selling 20% of the shares to raise XOF56.92bn ($101.2m) in the largest share offer on the BRVM.
Technology: It was reported by Enko that telco Mascom could do an IPO in Botswana later this year and Econet’s Strive Masiyiwa says it will be in October and will be the biggest listing on the Botswana Stock Exchange, according to this report. Namibia’s MTC (Mobile Telecommunications Corporation) has announced plans for an IPO in Mar-June 2020.
Real estate: ICON Properties PLC’s IPO last December in Malawi raised $19.3m, and the shares were listed on the Malawi Stock Exchange in January.
Industrial: Skyway Aviation Handling Co (SAHCOL) in Nigeria launched an IPO in November 2018 but only raised NGN1.2bn ($3.4m) compared to a target of NGN1.9bn ($5.2m) despite extending the offer until January. It listed on the Nigerian Stock Exchange on 24 April.
Healthcare: Speed Medical SAE raised EGP21.5m ($1.3m), less than half its target in a domestic IPO before listing on the Egyptian Exchange in April. Consumer: Eastern Tobacco, listed on the EGX, announced in March that it had raised EGP1.7bn ($104m) through offering 4.5% of its shares in public and private offers.

Global Outlook

The Africa picture mirrors a global 37% fall in capital raised through IPOs in global markets, compared to the first 6 months of 2018. According to Baker McKenzie, a total of $69.8bn was raised across 514 IPOs, which is the lowest for value and volume since 2016. The US Federal government shutdown, continuing trade tensions between the US and Beijing, the ongoing Brexit saga and the decline of mega IPOs all contributed to a slower market performance. “With fewer IPOs in the market, competition amongst exchanges is growing, as some listing locations make strategic changes to entice public offerings. The introduction of China’s Science and Technology Innovation Board looks set to shake up the market and challenge New York and Hong Kong for tech listings. “

Koen Vanhaerents, Baker McKenzie’s Head of Global Capital Markets, says: “.. significant political issues stifled activity, along with a change in investor sentiment towards risk – particularly among pre-revenue companies.” The decline “is perhaps skewed slightly when compared to the stellar performance seen in the same period in 2018. With a strong pipeline, H2 2019 looks set to deliver a much more prosperous performance overall.”

EMEA outlook

The EMEA IPO market struggled during the first 6 months of 2019 due to uncertainties surrounding the UK’s exit from the European Union. Overall capital raised fell by 67% compared to the same period in 2018 to $9.2bn while the number of IPOs fell by 61% to 47. Cross-border activity was even more profoundly impacted with only three listings in EMEA and only one of those on the London Stock Exchange. Domestic activity levels helped the London Stock Exchange to retain the top spot for overall capital raising at $2.7bn from 12 listings. Seven of these listings were from the financials sector and raised almost $2bn, the largest of which was Network International’s $1.4bn IPO.

Second to London was Borsa Italiana with $2.3bn from 7 listings, boosted by the $2.2bn Nexi SpA listing. SIX Swiss exchange pulled in $1.9bn from 2 IPOs, with Stadler Rail’s debut accounting for $1.3bn of that.

Despite its sluggish performance, EMEA is proving to be the region of choice for FinTech listings, particularly in the payments field, as the age of digitization and cashless transactions continues to explode, fueling the need for innovation and technological growth. FinTech listings accounted for more than a third of capital raised and the largest listing was Nexi SpA’s IPO.

Weak reception for Airtel Africa $750m IPO

Share price chart from ADVFN ( https://uk.advfn.com/stock-market/london/airtel-africa-AAF/share-chart )

Shares in Africa’s second biggest telecom company had a disappointing start in conditional trading on the London Stock Exchange today. The initial public offer had been priced at the bottom of the 80p-100p range, and in exchange trading it quickly plummeted 16% from 80p and by 4pm the shares had retreated to around 67p.

Today the trading was conditional, only for holders allocated shares in the global IPO. The shares are set to start trading unconditionally on the LSE from 3 July and Airtel Africa will be dual-listed on the Nigerian Stock Exchange from 5 July.

The offer of 744.0m shares had raised approximately £595 million ($750m), including 39.2m shares offered to Nigerian institutional and high net worth investors for a total Nigerian offer of some $39.4m.

According to this morning’s stock exchange news service RNS announcement : “The offer was oversubscribed with strong interest from a variety of reputed global investors across the United Kingdom, United States, Africa, Europe, Middle East and Asia. Dominant allocation to Global long only, strategic and pre-IPO investors.”

There is an over-allotment option of 67.6 new shares which, if exercised in full, would account for approximately £54m of the offer. Including the overallotment option, the market capitalization at this afternoon’s price is some £2.6bn ($3.2bn), down from the offer valuation of £3.1bn.

After the IPO the free float was 19% but after including pre-IPO investors holdings the free float will be over 25% and it aims to be included in FTSE UK indices.

According to the RNS announcement, Raghunath Mandava, CEO of Airtel Africa, said: “We are delighted by the strong response we have received.. This is a proud moment for the team that has built Airtel Africa into the second largest mobile operator in Africa. We are now the first telecom company to simultaneously list on the Premium segment of the London Stock Exchange and Nigerian Stock Exchange through an IPO.”

According to our article in January and this month in here and today’s article in the Financial Times a consortium of investors including SoftBank Group, Singapore’s sovereign wealth fund Temasek, Singapore Telecommunications and private equity firm Warburg Pincus invested $1.25bn at a valuation of around $4.4bn last October. In January this year Qatar Investment Authority invested $200m at a valuation closer to $5bn.

At that stage it was anticipated that the London and Nigeria IPOs would raise $1.25bn.

The IPO was advised by 8 global banks: JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank.

Indian parent Bharti Airtel aims to use the funds to slash debt and free cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94m customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

Performance had improved after years of losses against financially stronger telco players in Africa, including Vodacom. Rising mobile data consumption had helped it reach a first full year of profit and the figures for the year to 31 March were revenue of more than $3bn and operating profit of $734m.

Airtel Tanzania HQ (photo by Prof.Chen Hualin creative commons by Wikipedia)

Work starts on African exchanges linkage project

Africa’s stock exchanges, regulators, central banks, stockbrokers and clearing systems are working together on the African Exchanges Linkage Project (AELP), set to create trading and information links between the 7 leading securities exchanges.

Participating exchanges at the first capital markets stakeholders’ roundtable were the West African regional exchange Bourse Regionale Valeures Mobilieres (BRVM), Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange, The Nigerian Stock Exchange and the Stock Exchange of Mauritius.

The linkage project is a joint initiative by African Development Bank and African Securities Exchanges Association. It aims to facilitate cross-border trading and settlement of securities, unlock pan-African investment flows, promote innovations and diverse investments, and address lack of depth and liquidity in Africa’s financial markets. For more background, see our recent article.

The project is backed by $980,000 grant through the African Development Bank Korea-Africa Economic Cooperation Trust Fund (KOAFEC).

Karim Hajji, ASEA President and chief executive of the Casablanca Stock Exchange, said according to the press release: “Regional integration is a high-priority continental agenda. By organically linking 7 exchanges in Africa which collectively have a market capitalization of over US$1.4 trillion, the AELP will stimulate intra-African flows and provide opportunities for investors and trading participants in over fourteen African countries.

“With the expected outcome of boosting liquidity in African capital markets, the AELP will unlock the powerful potential of African markets to access and redistribute domestic capital for economic development.”

Pierre Guislain, African Development Bank’s Vice-President, Private Sector, Infrastructure and Industrialization, said: “The partnership between us and ASEA complements the Bank’s interventions towards deep and resilient capital markets in Africa. The African Exchanges Linkage Project will contribute to a wider financing pool for African corporates and SMEs and help close Africa’s infrastructure deficit, estimated at US$67–107 billion annually. Indeed, the continent needs deep, liquid and linked capital markets that will enable accelerated mobilization of domestic resources and incentivize private financing of infrastructure”.

Participating partners at the workshop on 24 April at African Development Bank’s headquarters included:
• Regulators Le Conseil Régional de l’Epargne Publique et des Marchés Financiers, Autorité Marocaine du Marché des Capitaux, Securities and Exchanges Commission of Nigeria, and the Capital Markets Authority of Kenya.
• Central bank – Banque Centrale des Etats de l’Afrique de l’Ouest,
• Stockbrokers and exchanges associations – Association Professionnelle des Sociétés de Bourse, Association of Stockbroking Houses of Nigeria, Kenya Association of Stockbrokers and Investment Bankers
• Clearing systems – Association Professionnelle des Banques Teneurs de Compte Conservateurs, Maroclear, Central Securities Clearing System – Nigeria, Central Depository and Settlement Corporation Ltd. – Kenya
• Investment banking – Afrinvest West Africa.

Pierre Guislain of African Development Bank and Karim Hajji of African Securities Exchanges Association and Casablanca Stock Exchange

Africa’s jumbo stock exchanges to link in 2019?

An ambitious project to link Africa’s 7 biggest securities exchanges is moving to implementation with a call this month for a project manager for the coming year. The African Exchanges Linkage Project (AELP) aims to transform the number of trades on exchanges and investment flows across Africa by creating a platform so an investor in once country can buy or sell shares listed on an exchange in another country.

It’s a leading initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank, and will feature a central linked trading platform linked to the different exchange trading systems. The roll-out was boosted last November 2018 by a grant of $980,000 through the African Development Bank Korea-Africa Economic Cooperation Trust Fund (KOAFEC).

At November 2018, the participating exchanges were listed as Johannesburg, Nigeria, Nairobi, Casablanca, Bourse Régionale des Valeurs Mobilières SA (BRVM) and the Stock Exchange of Mauritius, this year the Egyptian Exchange has been added. The initial 7 exchanges represent at least 85% of the market value of listed securities (market capitalization) across Africa. More exchanges are to join after the pilot phase.

The central platform will enable free flow of trading information between the linked exchanges, and stockbrokers will be able to access the trading platform and place orders on the member exchanges through “sponsored access”, working through a locally registered stockbroker. It will use order-routing technology to channel orders through brokers into exchange trading systems.

Oscar Onyema and Karim Hajji, previous and present Presidents of African Securities Exchanges Association

Karim Hajji, CEO of the Casablanca Stock Exchange and President of ASEA, says: “We look forward to working with AfDB more closely and fostering a more connected African capital market,” according to a Nigerian online report.

Oscar Onyema, CEO of the Nigerian Stock Exchange and former president of ASEA, told stockbrokers at a workshop last November: “The AELP will start off with the 6 markets participating in the pilot with the goal of onboarding other markets in Africa who meet the minimum requirements. The countries participating in the AELP pilot phase are strategically spread across the continent as this will become instrumental in the scaling up of the project.

“The model for the linkage will be ‘sponsored access’, meaning that the cross-border trades will be required to pass through the risk-management system of the sponsoring broker before flowing to the exchange. We believe that this model will minimize the disruption to the local market and provide confidence for all stakeholders.

“Thus we anticipate that the initiative will be welcome by all stakeholders and will support ASEA’s goal of boosting intra-Africa capital-market trading activity. ”

According to a document from ASEA: “The AELP is aimed at addressing the lack of liquidity and promoting information-sharing in the African capital markets. It is envisaged that the linkage project would allow cross-border visibility and open up markets for investors to trade in any of the linked markets.”

Anticipated benefits include: more liquidity, measured by the number of deals and the value traded; better market openness; increased participation by foreign investors; more participation by African investment institutions such as the fast-growing pension funds across the continent; African businesses and other issuers being able to raise capital and floating shares across the continent; creating a bigger financial market; convergence towards international standards; and building capacity and sharing information.

In preparation for the project stockbrokers were asked to talk to clients to gauge potential interest in buying and selling securities on different exchanges, and to give their inputs into the design and rollout.