The highly publicised and anticipated Kenya Airways rights issued closes today. The issue opened on 2nd April 2012, ran for 3 weeks and closes today.
A rights issue is an issue of additional shares by a company to raise additional capital. The current shareholders (prior to the rights issue) are given a chance to buy additional shares, proportionate to their shareholding in the company prior to the rights issue. The idea is to ensure that shareholders have the opportunity to maintain their exact same position in shareholding, so that no one buys the entire company at the expense of other shareholders.
The company intended to raise KES 20.6 billion by issuing 1,477,169,549 (1.4 billion) new ordinary shares. The shareholders had the right to subscribe to 16 new ordinary shares for every 5 ordinary shares held on the register closing date (19th March 2012). It is expected that the company will be able to raise about 70% of the targeted capital.
The rights issue began on a high note as the government and Dutch airline KLM, who are anchor shareholders of the national carrier with a combined 49 per cent stake, committed to take up their rights. This translates to approximately KES 10.094 billion. The World Bank‘s private sector lending arm the International Finance Corporation (IFC) also committed to take up KES 2.068 billion worth of shares in the issue. Consequently even before the rights issue had taken off the airline was assured of about KES 12.582 billion shillings from these institutions.
When the rights issue began the Kenya Airways share was trading below the rights issue price of KES 14 per share. This led to a lot of speculation to whether it is worthwhile for shareholders to exercise their rights. Over the duration of the rights issue the performance of the share improved and it rose from an annual low of KES 12.55 days before the issue commenced to KES 13.95 to KES 14.55 and to a high of KES 15.00 per share. At the close of business on Wednesday the share closed at KES 14.90. The improved performance of the share improved investor confidence and drove shareholders to exercising their rights.
Once the rights issue closes the firm will consolidate the results of the issue and announce them on the 30th of May 2012 and the shareholders will know how successful the issue was. By 12th June 2012 the new shares will begin trading pari pasu (like the already-listed shares) on the Nairobi Stock Exchange (NSE).
Plans are already underway for other firms listed on the NSE to carry out similar rights issues before the year ends. Standard Chartered Bank, Diamond Trust Bank and NIC Bank have expressed interest in turning to their shareholders for additional capital.