East African investors were offered free shares to motivate them to buy shares in telecommunications company MTN Uganda, which opened its $ 250 million ($ 895.56 billion) initial public offering on Monday.
South Africa’s MTN Group is selling 4.47 billion shares of its Ugandan subsidiary at a price of US $ 0.06 (Ush200) each.
In order to increase the chances of success of the offer, applications are being made made the purchase of at least 1.1 billion shares, MTN is offering potential investors free shares between five and ten units per 100 units allocated.
This corresponds to an effective discount of five to ten percent of the purchase price, provided an investor receives their full allotment and the incentive shares.
There are no allotment quotas, but Ugandan investors are preferred in the event of oversubscription, giving other East Africans unlimited leeway e.g. to acquire the shares.
“As part of the offering and in line with the objective of expanding Uganda n participation in MTN … the selling shareholder is transferring incentive shares for free to the categories of qualified applicants who apply for the sales shares and to whom the sales shares will be allocated, “says the prospectus.
” Accordingly, eligible applicants receive an allocation of sales shares for which the applicants must pay, as well as an allocation of incentive shares for which the Applicants do not pay. “
In 2019, the Uganda Communications Commission (UCC) ordered all foreign-owned telecommunications companies to hold at least 20 percent of the shares in locals and East Africans (96.01 percent) by the end of 2021 Businessman Charles Mbire (3.98 percent).
The IPO is available to Ugandan investors as well as citizens of other East African states Community open. Foreign investors can also take part in the offer.
Ugandan investors, however, have top priority when selling shares.
Institutional investors in Uganda and other East African countries have to invest larger amounts in order to get free shares .
To receive five free shares for every 100 units allocated, professional investors must apply for shares with a minimum value of $ 1 million.
Actually for 10 free shares each To qualify 100 allotted units, investors must apply for at least $ 50 million worth of shares.
Institutional investors can get the biggest discounts, which could be hundreds of millions of shillings.
The Incentive stocks are rare for an IPO in the regional market and signal MTN’s determination to ensure the offer is successful.
“The selling shareholder can suspend the offer n and refund all funds received from applicants if total applications comprise at least 25 percent of the offer share s (approx. 1,119,452,212 offer shares) will not be received, “says the prospectus.
” With this approach, the selling shareholder will contact the Capital Markets Authority of Uganda and the Uganda Securities Exchange.
Ugandan retail investors applying for a total minimum value of $ 1,400 will receive all shares for that value in addition to the number of Incentive Shares they are entitled to, subject to the total number of Offering Shares available.
All applications made by retail investors If the total minimum value exceeds USD 1,400, all shares and the corresponding incentive shares will be allocated on a pro-rata basis. “
The pro-rata allocation of incentive shares will be determined by MTN according to the allocation priority” and in such a way that persons within the same category of applicants their applications are treated fairly and equally. ”
The IPO is likely to be Uganda’s largest ever and a major boost to its stock market, a small exchange with 40,000 investors trading just 17 stocks.
The Ugandan government has the Listing of telecommunications companies on the local stock exchange on one of their license renewal terms to allow local ownership of large companies with few major shareholders.
The listing will make MTN Uganda listed on the Nairobi Securities Exchange after Safaricom went public in 2008 to the second listed telecommunications company in EAC.
– Business Day