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Why is MBEA keeping NIC investors in the dark?

By Patrick Kagenda

No official numbers yet but word on the street is that National Insurance Corporation’s Shs 7 billion Initiation Public Offer (IPO) was over-subscribed.

“This IPO went very well under the circumstances of a small amount of shares issued. When you have an issue this small worth only Shs 7 billion, it is only the retail investors who participate because it is too small for institutional investors,” said Simon Rutega the Chief Executive at the Uganda Securities Exchange (USE) where the shares are listed.

The government of Uganda offloaded its 161,522,000 shares (40%) holding in NIC at Shs 45 per share to raise Shs 7.2billion. The offer now renders the affiliate of Nigeria’s Industrial and General Insurance PLC (IGI) completely privatized.

Unconfirmed reports of over-subscription have sparked speculation around the process of allotment of shares and the inevitable refund.

A trader with a stock brokerage firm in Kampala told The Independent that if government operated like a private company it would have applied the greenshoe option that allows the vendor to issue extra shares to mop up the excess demand.

“It will now require the lead sponsoring broker to go back on the drawing board and review the share allotment. It is a fact that people who had applied for a lot of shares will be refunded their money. However they will have a chance to buy the shares once trading on the secondary market begins,” the source said.

National Insurance Corporation (NIC) remains tight-lipped. Josephine Omunyidde, the assistant manager Corporate Communications said it is MBEA, the stock brokerage firm that is the lead sponsoring broker of the IPO that is authorised to comment.

MBEA, however, appears happy to let potential investors in the IPO grope in the dark.

From the onset, the NIC IPO has been shrouded in secrecy and controversy.

When it was issued on Dec. 31, 2009, NIC was battling accusations from the Makerere University Dons Association (MUASA) over a Shs 16 billion dispute as their pension fund which is a quarter of the NIC value.

Although the IPO appears to have shrugged off the Makerere wrangles, the continued opaque operations at MBEA and the government’s privatization unit at the ministry of Finance could hurt interest in the NIC shares on the secondary market.

In fact, speculation is now rife that despite the talk of over-subscription, interest in the NIC shares took a beating from the Makerere saga and the Safaricom hangover and investor lethargy.

“The Safaricom issue in the market isn’t over yet. Safaricom was oversubscribed, and people’s money was returned and its trading price hit rock bottom,” said one trader, “With the world slowly recovering from the global financial meltdown, people are very careful with where they are investing their money.”

According to the NIC IPO time table, trading of the NIC shares on the Uganda Securities Exchange will commence on March 25 bringing the number of tradable counters on the bourse to 12.

The USE needs counters opened to attract investors. Compared to other regional bourses, the Uganda Securities Exchange (USE) has been performing below par ever since the lead institutional investor in the country, the National Social Security Fund (NSSF) ceased trading following the Temangalo land saga. The flight of the offshore investors following the onset of the global financial meltdown added to its pain.


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