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Co-Op IPO Reached 81 Percent: Curse of Safaricom?

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The Co-Operative Bank failed to shine when it decided to go public. 81% of available shares were taken up, leaving a Ksh1.3 billion hole in its finances.

Apparently, this is the first time since 2005 that an IPO has been undersubscribed, and the Nation blames the recession and the “collapse in world financial markets” for the shortfall. But could investor confidence have faltered after so many people got their fingers burned in the Safaricom debacle?

The Safaricom IPO was oversubscribed; people were desperate to invest in what they considered to be a blue-chip Kenyan stock. But once the foreign investors had made a quick killing and left, small investors were dismayed to see the value of their shareholdings drop precipitously. It is not too much of a stretch to guess that small investors are now wary of sinking their money into another IPO that has been hyped by the investment houses.

In time, provided the Co-Op management board don’t do anything stupid and invest wisely, the stock should rise. It is then that investors may decide to take the plunge. For now, it’s obvious that investors are waiting to see what happens next.

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