GUEST POST by Anonymous
Just got a call from my friends telling me about the on-going great Safaricom IPO. The Safaricom IPO is running from 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:
- Who exactly is the government. Is it ODM or PNU or both?
- 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.
- 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 he 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.
Crazy confessions of what a campus lady student did under the seats at Kenya Cinema