Just got a call from my friends telling me about the upcoming great Safaricom IPO.The Safaricom IPO is meant to start on March 28th to April 26th with 10 billion shares for sale.

Wow. Did someone say 10 billion shares? So if it is true that Safaricom will be selling 25% of it's shares then safaricom has in total of about 40 billion shares. I know that those figures are wrong. GM the biggest company in the USA has a market cap of 11.5 billion. Safaricom has a market cap of 40 billion. I might be seeing double. If I am wrong please correct me. That was enough to make me interested in this IPO.

1. Buy Safaricom on Monday sell it on Monday

That is the story I have been told that most Kenyans are telling me that they will do. That is not investing. That is what we call gambling. As we all know the house always wins with gamblers.

The first rule in investing in anything is.

If you won't own a business for 10 years, don't even think about owning it for 10 minutes.

So my friends and family are already disqualified from buying this stocks.They have no intention of even looking at the books of this company.More than a third of the people buying this shares have no intention of keeping it past Tuesday.So why not wait until the real investors are in the company instead of a bunch of gamblers?

2. Why is Safaricom selling?

If the company is so profitable, why have they been trying to get rid of it for so long? They say the Kenyan government is trying to offload Safaricom shares. If you believe the Kenyan government is an angel that really cares about Kenyans, then think again.

These are the questions I asked myself

1. Who exactly is the government. Is it ODM or PNU or both?
2. Is there another party in this so called government we do not know about? We all know some people will have kickbacks etc in the so called government.
3. The first time I heard about this issue, it was vodafone that was selling 6% of it's holding, what changed?
4. Why was ODM against it, before the became for it? Did they just find Jesus when Raila was made PM?

The first rule of in making money in an IPO is that if the main reason to sell is to give venture capitalists their money back, you have a 70% chance of losing. Safaricom does not want to sell shares to buy the latest technology etc, they want us to pay some other entity money. That is not very smart investing.

3. Safaricom numbers don't add up

If it don't fit ,you must acquit. So said Johnny Cochran.

In my case the numbers are just mind boggling for this IPO.

There are going to be 10 billion shares at ksh 5. So for a one month period, the Kenyan stockbrokers will have 50 billion in their coffers. At say 2% broker commission, the kenyan stockbrokers will have over 1 billion in their accounts. If there any stock brokers in the Kenyan stock exchange, buy them instead.

Here is where it becomes interesting. Some people are expecting those shares to do to 10ksh on day 2. So technically ,the Kenyan market will have 100 billion ksh in a period of 2 days to invest in Safaricom. Do you really believe that ? The Kenyan GDP in 2007 was 58 billion.

Did someone say over subscription, I will say bubble.

4. Safaricom Growth

I have been told that safaricom revenues will continue to grow. Maybe, but that is the real reason that someone somewhere is selling. Growth of over 50% in any company in consecutive years just spells bubble.

No company on this earth leave alone an economy can grow at those levels unless someone is cooking the books or it's a totally different product that no one has ever seen. It could also be a monopoly, but I heard that more cell phone providers are about to be licensed and the Internet cable is coming soon. Safaricom can not and will not be able to sustain such growth. So the next time you see their balance sheet, you will note that their level of growth has started to drop.

5. Company Management

If you want to make money in any IPO, the management team is very important. I hear that the current GM is leaving soon. Why? Who is taking his place? And who are these safaricom management team?

I called my so called kenyan broker and he could not even tell me who the directors of this company are and the top management team including their company secretary. If my own broker does not know who runs this company and how long the team will be there, why should I put my money in such.

Maybe I got the wrong broker. I might just be negative about Kenyan business in general but the numbers for this IPO, are just too hard for me to swallow that they are kosher.

I will try and get the safaricom books and comb their accounts. I haven't done P/E's, EPS, and their debt ratios. However, I am not buying it, you should do that on your own.

TrackBack URI for this entry

10 Comments

Nancy March 30, 2008 Votes: +0	Next time you post, do spell checks. It is obvious to me that you did this post in one sitting. I have been looking for their prospectus but can't find it. Any one know where I can get it online. I have posted on the forum about it. I need the safaricom prospectus. I can tear it apart for youhttp://masaaa.com/kenyanforum/...m-ipo/#186. report abuse vote down vote up
Bob March 31, 2008 Votes: +1	You arre factually wrong on two points.. 1. The market cap is outstanding shares times share price. So Safaricoms market cap is kshs200bil..which is equialent to about $3bil. This doesnt come close to GMs $12bil market cap. 2.Kenyas GDP was $41bil in 2006 which is equal to about kshs2.4trillion. This is way beyond the Kshs58bil you alluded to. report abuse vote down vote up
makii March 31, 2008 Votes: +0	I will agree to change the following and I apologise for the factual error. However, being a blog, I can't change my own errors. But I will apologize for it. 1. The market cap error is duly noted Bob. That was a big error but doesn't change the underlying point. It is a huge share issue. 2.Kenya's GDP was 58 billion dollars in 2007. http://www.alacrastore.com/country-snapshot/Kenya That is just a typo. Safaricom IPO market cap is about 5% of Kenya's GDP. I am still not buying. I will wait for sometime. If I can get a prospectus from anyone online.I will be happy to change my mind but if all we have is more pnu, odm political banter about a simple financial transaction, I am within my rights to be wary. report abuse vote down vote up
moneymaker April 01, 2008 Votes: +0	That is why I don't understand Kenyans. Your analysis makii, is the most comprehensive analysis of the safaricom IPO I have seen on the net in Kenyan newspapers. Kenyans are so hung up on politics,they forget that finance and politics don't mix. I have gone to forums where some are for or against it but no one can say why. The questions you have asked are questions that should be asked of every so Kenyan Stockbroker who is selling those shares. Instead all you are seeing are long lines and stock brokers just taking money. No one is asking questions. Those numbers are huge. How they came up with such number of shares in a company is something worth asking. I hear shares can't go down. I think Enron ,bears and stearns were more stable than safaricom and they still went down. I too am sitting on this for some time. I bought Kengen shares and I should have waited. If the company is good now ,it will be good in December 2008. Note to the naysayers. Asking questions is important, answering the questions adequately is what you call a sale. report abuse vote down vote up
cathy April 01, 2008 Votes: +0	When I go to pnu blogs they love it. I go to odm blogs and they hate it. What's the beef? You have asked legit questions. However, I am buying to sell immediately. Oh yes for this one, I will be a gambler. I can afford 200 dollars . I drink that on weekends. I will let it go wherever. I just feel for those guys selling their shambas and bikes for this one. report abuse vote down vote up
cathy April 01, 2008 Votes: +0	oh by the way, some Kenyan sites have copied and pasted the whole article without giving any attribution to the source. They are well visited blogs and it is a shame to see them not attributing source yet run screaming matches about Kibaki Mwizi. man Kenyans, you even steal words. report abuse vote down vote up
kegeguy April 01, 2008 Votes: +0	I also decided to buy my shares. However, I am not that comfy so I reduced the number I wanted. I will be here in december to tell makii that I am a millionaire. report abuse vote down vote up
canir April 01, 2008 Votes: +0	I need to go back to school. The numbers were just confusing me so I had nothing to say about them. The management part was interesting. Is it a romour or a fact. If it is a romour, isn't it important for the management team at safaricom to say otherwise. It is curious that Kenyan brokers do not know who runs this IPO, maybe you should get another broker makii. I bought my shares too. It's a lot to me so I really hope you are bloody wrong. By the way what would the market cap be if the shilling rose against the dollar. and what the hell is a market cap and why should I care? report abuse vote down vote up
Kamundu April 01, 2008 Votes: +0	It is a good thing that you kibaki fellows have seen that he is wrong. Safaricom is a pnu ploy to make some money. We should all reject it. report abuse vote down vote up
wegi April 01, 2008 Votes: +0	Kamundu, I have done my work for today, but I would advice you to edit your message. Makii might not be so accommodating as I am when I am moderating. report abuse vote down vote up

Email Name Website		Comment smaller | bigger
		Subscribe via email (Registered users only) I have read and agree to the Terms of Usage. Write the displayed characters Add Comment

• Free Hosting vs Paid Hosting - The Kenyan Experience
• Kenyan Customer Service is Horrible
• Kenyan Cyber Terrorists Should Just Grow Up
• Kenyan Women to Use Dildos
• Kenyan Women Now Get Men

Related Items:

• Free Hosting vs Paid Hosting -
• How to Commit Suicide by ODM
• Kenyan Customer Service is Hor
• Kenyan Cyber Terrorists Should
• Kenyan Women Now Get Men