NIC Uganda’s IPO likely to be oversubscribed

As the National Insurance Corporation initial public offering winds up, early signs indicate that it could be oversubscribed.

One stock brokerage firm has already received applications for 80 million shares — nearly half of the shares available for the public to buy, implying investors will not get all the shares they applied for.

Analysts say the IPO is quite small — the number of shares on offer amount to just 161 million, a number that pales in comparison to Stanbic Bank’s flotation of a billion shares or Kenya’s 2008 Safaricom IPO that saw 10 billion shares sold to the public — hence the oversubscription.

Ugandan investors have been given priority in share allocation, with each entitled to a minimum of 2000 shares.

Just a five years ago, each NIC share was valued at $30. Now the offer price is at Ush45 ($0.02) per share.

As the flotation drew to a close, at least five brokers reported that an increasing number of investors were making applications although they declined to reveal how many shares their clients had applied for.

Other stock brokers said the long absence of a local IPO had also contributed to the rush for NIC shares. There has not been a company flotation in Uganda since 2006 when the government and the Stanbic Bank each offered a 10 per cent stake of their companies to the public.

“This IPO is not the most exciting we have had. But the market was hungry for something to reignite it and NIC has provided that,” said Joseph Kibuuka, a research and market development officer at Crested Stocks and Securities.

There is, however, a growing discomfort among some Ugandan investors, particularly speculators who made losses in the Safaricom flotation.
Besides this, NIC has outstanding liabilities relating to the Makerere University’s Deposit Administration Plan — a staff retirement scheme it handled and accrued debts amounting to Ush17.7 billion ($8.87 million) between 1996 and 2005.