By CHUKWUMAH KELECHUKWU
Shares of Airtel Africa took a historic plunge by 16 percent to 67p (Pence) per unit on Friday, hours after the telecom firm was listed on London Stock Exchange on Friday morning, ranking among ”the worst debuts on European exchanges this year.”
The losses on this first trading day at LSE knocked £500m off its opening valuation, giving the equity a market capitalisation of about £2.6billion, down from £3.1billion.
Ahead of its planned Nigerian Stock Exchange (NSE) listing on July 5, Airtel listed its shares on the LSE today Friday, June 28, 2019, priced at 80p, the bottom of its previously announced price range of 80-100p per unit.
The African subsidiary of Indian telecoms giant, Bharti Airtel, which operates a telecoms and mobile money business across 14 African countries — raised £595million through the offer, which took place concurrently on the London and Nigerian exchanges and represented 19 per cent of its total stock.
For its London Stock Exchange listing, the final offer stood at 744 million new shares with the initial market capitalisation at about £3.1 billion at issue.
The telco said it would offer between 501.125 million and 716.406 million shares (25% minimum free float) to Nigerians at a price range of N363 to N454 per unit through book building.
Book building is a process used by companies to raise capital through public offerings, both initial public offers (IPOs) or follow-on public offers (FPOs), to aid price and demand discovery.
However, only high net-worth individuals and institutional investors that have a minimum of $3 million in investable assets will be offered shares.
Offer prospectus of the third largest telecommunications company in Nigeria stated that proceeds from the IPO would be mainly used for debt reduction to a targeted ratio.
The telecom company is highly leveraged and has sustained high operating cost over last three years pointing to minimal returns even after reducing its debt margin.
For instance, revenue for 2018 and 2017 stood at $2, 910million and $2, 884million respectively but operating expenses for the two years stood at $2, 375million (for 2018) and $2, 718million (for 2017).
The huge leverage coupled with persistently high operating cost that eats deep into its revenue is the snag on the stock which investors priced in at the London Stock Exchange.
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