Quickmart shares dip 7.9pc on second day as investors cash in

Quickmart's share price experienced a significant decline of 7.9 percent to Sh8.26 on Friday, following a rally in the initial trades upon Thursday's listing on the Nairobi bourse. The decline translated to a Sh2.56 billion drop in the company's valuation to Sh33 billion. Despite this, the stock remains above its IPO price of Sh7.50 per share. On its first day of trading, the stock gained 19 percent to Sh8.90 per share.

Investors traded seven million shares of the retailer on Friday, resulting in a turnover of Sh57.8 million. This was lower compared to trades of 9.68 million shares valued at Sh86.2 million in its debut session on Thursday. The bulk of Friday's trades took place in the morning, with a price low of Sh8.18 and high of Sh8.40 per share. By the close of trading, the counter had higher outstanding purchase orders.

According to Wesley Manambo, a senior research associate at Standard Investment Bank, the initial listing rally signaled ample demand for the stock. However, he noted that the price could progressively settle towards the offer levels as this demand normalizes. Quickmart's price movement in its first two days in the market has tracked that of Kenya Pipeline Company and Family Bank.

Kenya Pipeline Company, which was priced at Sh9 per share in its IPO, closed its first day of trading at Sh9.18 a unit before retreating to Sh9.10 per share on the second day in the market. Similarly, Family Bank entered the market with an introduction price of Sh18 per share, jumping 44 percent to Sh26 after its first trading session. The stock fell 5.2 percent on its second day to Sh24.65 a share.

IPO shares are usually exempted from the usual price movement limit of 10 percent in the first day of trading upon listing. This exemption allows investors who sell on the day to book outsized gains immediately, depending on the demand for the shares. Subsequent sessions are subject to the movement cap, until a time when the company makes a material announcement.

Quickmart listed four billion shares on the exchange, following an oversubscribed initial public offer that saw investors put up offers valued at Sh18.4 billion against the target of Sh15 billion. The retailer's founder families and private equity fund Adenia Partners put up two billion shares for sale in the IPO, representing half of the issued shares of the company.

The IPO attracted 18,492 applications for 2.45 billion shares, representing an oversubscription of 22.7 percent. The three anchor investors were UK government-backed fund MOBILIST, US-based investment firm 337 Frontier, and UK fund manager RWC LLC. Other Kenyan and East African Community investors who participated in the IPO were allocated a total of 900.6 million shares, equal to a combined stake of 22.5 percent in Quickmart.

Key points

• Quickmart's share price declined 7.9% to Sh8.26 on Friday.
• The stock remains above its IPO price of Sh7.50 per share.
• The IPO was oversubscribed, with investors putting up offers valued at Sh18.4 billion against the target of Sh15 billion.