Insurance firm opts out of IPO to cushion shares from bear run

CIC Insurance Group has opted out of a planned initial public offer (IPO) in favour of listing by introduction at the Nairobi bourse as it seeks to safeguard its share value.

The insurer said it will list its current shares at the Nairobi Securities Exchange (NSE) by introduction due to the bear run that has eroded share value at the bourse.

The firm will instead raise additional capital through a rights issue to fund its regional expansion plan.

“We have a responsibility to safeguard our shareholder wealth and our risk analysts have advised the organisation that this is not the right timing for an IPO,” said group CEO, Mr Nelson Kuria in a statement.

The group, which emerged from a split in the parent company in 2010, is hoping to protect shares from the dilution that occurs during an IPO.

“During an IPO, you must offer a discount. No one will accept prices at par with or higher than the market value,” said Suntra Investments researcher, Mr Johnson Nderi.

The insurer has appointed Faida Investment Bank Ltd as the lead transaction advisor, Oraro & Company Advocates as the legal advisor, Kingdom Securities as the Sponsoring stock broker, Deloitte and Touche as the reporting accountants and Co-operative Bank of Kenya Limited as share registrars.  

Its shareholders last year resolved to increase the insurer’s share capital to Sh3 billion from Sh1.2 billion by creating 90 million ordinary shares.

Fears of lukewarm subscription as investors avoid the NSE are abound among companies hoping to list.

Family Bank has put its IPO plans on hold.

Companies that undertook IPOs last year experienced under subscription and many expect to report losses as their stocks take a hit.

Already, British American Insurance has issued warning that profits will dip by 25 per cent.

CIC Insurance Group had planned to raise share capital by listing on the NSE during the first quarter of 2012 in order to fund its expansion ambitions.