Longhorn Kenya Limited shares began trading on the Nairobi Securities Exchange on 30^th May 2012. The shares were initially priced at KES 14 and one of the principle reasons for listing, aside members of the public from participating in their ambitions of “expanding minds” through learning was price discovery according to their listing memorandum (read it here).

Price Discovery?

This is the process whereby the price of an item is determined by the interaction of buyers and sellers in the marketplace. For example, if someone offers you KES 10 for a chapati and another offers KES 25 for the very same chapati, and you are willing to sell that chapati for KES 25, then the price of that chapati is KES 25. If another seller of chapatis joins the market and he  or she is willing to sell his chapatis for KES 15, then the price of chapatis will reduce to KES 15 and to stay in business you would have to lower your prices. Of course we are assuming that the players in that market are thinking logically and the market is comprised of just you few players and so on and so forth.

The Longhorn share price upon listing last week quickly rose to KES 20 but has since stabilised at the KES 18 region, closing yesterday at KES 18.35. For the shareholders, as of yesterday, this is a 31% appreciation on their investment give or take some costs here and there like transaction costs. For a week of work, that's not half bad. If one had put in say KES 28,000 to buy about 2,000 shares, they have around KES 8,000 on their investment in just over a week. That can buy quite a number of chapatis.

{The above does not constitute investor advice. The opinions herein are for informational purposes and educational use only.}