Kenya Airways was expected to announce the results of its KES 20 billion rights issue today. This announcement has been postponed to the 8th of June. The rights issue has been the biggest cash-call in the East African stock markets with nearly 1.5 billion new ordinary shares on offer for KES 14. If successful, the rights issue would raise about KES 20.7 billion, money they intend to use to expand their fleet and destinations.

Analysts believe that, while the rights will be taken up in full and possibly oversubscribed once the shares commence trading on the NSE, the share price will fall. They say that the additional shares, 16 for every 5 currently held, will lead to a price drop because of the increased supply of the shares. The rights issue essentially quadruples the number of shares by adding 3.2 shares to every 1 share held. With this in mind, it is logical to say that the share price can even drop to four times the current value once the new shares begin trading on the NSE.

As the rights issue went along there were many interesting things that happened: for a long time the KQ share traded for less than KES 14 in the open market, making it difficult to attract shareholders to their rights shares while they could get their shares for cheaper on the open market. Along the way, the Government of Kenya and KLM, two major shareholders in the national carrier affirmed their commitment to take up their rights in full, assuring investors that at least 43% of the rights shares would be taken up. There was also news of Citi, the international finance firm, through its bank Citibank, would underwrite the rights issue. The International Finance Corporation, IFC, had also committed to take up USD 25 million worth of the rights shares (read that article here) adding to the list of commitments to the rights shares.

There was also a lot of debate on social media concerning various issues such as the KES 620 million expense budget of the rights issue (read more on that here) with over KES 60 million spent on advertising services and over KES 40 million that Citi would overall make for their underwriting services. Some bloggers also poked holes into the KQ Rights, taking issue with top management’s apparent lack of equity in the company (for instance here) and some Kenyans attempting to stop the rights issue in court but the case later getting dismissed by the court (read that article here).

In yesterday’s trading the share closed at KES 14.95, 0.99% lower than the KES 15.10 it closed at on Tuesday.

 NB: We had earlier written that KQ is announcing the results of the rights issue today. This has been postponed, as indicated in the edit