Microfinance and Capital Markets - Council of Microfinance Equity ...

IV. EQUITY BANK LISTINGAs previously mentioned, unlike the three other banks, Equity Bank did not execute anIPO. Instead the firm went from being traded over-the-counter (OTC) to being listed onthe Kenyan Stock Exchange on August 7, 2006. According to the board’s objectives, asprovided in the Equity Bank Investor Briefing 2006, the purpose of the listing was “tooffer shareholders and the Bank the benefits of the stock market, liquidity, and pricediscovery.” 71 Other objectives included “the need to consolidate and cement effectivecorporate governance,” the attempt to position Equity strategically in the capital markets,and the desire to allow Kenyan’s to own and be a part of the success of the bank. Prior tothe IPO, there was an agreement made that current shareholders would not divest of theirshares for two years following the listing as a way of locking in large shareholders andaligning their interests with existing and new owners. 72On April 23, 2007 after its initial listing, Equity Bank issued 181,129,100 new shares byallotting two ordinary shares to owners for every one ordinary share registered in theirname. This allocation led to a large increase in the volume of trading. 73 Equity’s stockhas shown excellent growth, with a 96% increase on the initial price. A recent publicationof the African Alliance, an investment banking group located in Africa, described theexcellent prospects for expansion for Equity. They write that by “providing bankingservices to the masses and generally expanding its distribution channels and services,Equity Bank Limited will be a star performer.” 74In addition, a second event occurred after the listing that gives credibility to this view thatEquity bank will be a star performer. On November 14, 2007, Equity Bank and HeliosEB Investors, LP, (“Helios”) subscribed for 90.5 million new ordinary shares in the bankat KES 122 (U.S. $1.94 per share, where 63 KES equals $1, versus the original listingprice at $0.96 per share) per new ordinary share. The purchase price equated to EBL’sweighted trading average, as traded on the Nairobi Stock Exchange for the three monthsending October 22, 2007. The investment will substantially increase EBL’s capital, andHelios will become the largest shareholder in EBL at 24.99%. The transaction awaitsregulatory approval from the Kenyan Central Bank and the Capital Markets Authority;moreover, the Nairobi Stock Exchange will be asked to approve the listing ofHelios’ shares.The share sale is not only important for the liquidity it brings to Equity Bank, butalso because Helios is a prestigious investor making equity investments in Africa. Helios’principals are Africans with a strong record in equity investing, backed by capitalfrom such investors as the U.S. Overseas Private Investment Corporation (OPIC),the Commonwealth Development Corporation (CDC), the IFC and the SorosFund Management. 7571 Equity Bank, Investor Briefing, 2006, 2.72 Marguerite Robinson, “Note on Equity Bank,” November 2006.73 See http://www.Bloomberg.com.74 African Alliance, “Kenya Banking Industry Review: Sector Report,” April 2007.75 Equity Bank Limited, Press Release, November 14, 2007.36