Airtel Uganda Ltd., a telephone company owned by Indian businessman Sunil Mittal, faced a soft response in its first sale of shares to the public. Investors, looking for safe bets, chose government bonds instead of buying stocks.
Of the initial offering of 8 billion shares, Airtel managed to sell only 54.5%, raising 211.4 billion shillings ($56 million). Surprisingly, retail investors, those who buy small amounts of shares, bought only 0.3% of the shares. The share price remained the same at 100 shillings when they were first sold.
On the other hand, Ugandan government bonds are giving returns of up to 15%. Airtel rival MTN Uganda Ltd. has seen its shares fall 14% since it first sold shares in 2021. This change in investor interest could be due to Uganda’s recent strict anti-LGBTQ law, which led US President Joe Biden to cancel some special trading privileges.
Paul Bwiso, head of the Uganda Stock Exchange, believes investors may have chosen government bonds because they consider them less risky compared to stocks.
At a recent auction, demand for Ugandan government bonds, due to be repaid in 2033, was eight times the amount sold.
Four years ago, the Ugandan government forced wireless companies to sell 20% of their shares to local investors to strengthen the stock market. The government-controlled National Social Security Fund bought 10.55% of Airtel shares.
Airtel’s decision to separate its mobile money business may also have affected share sales, according to Benoni Okwenje, head of financial markets at Centenary Bank.
Telecommunications companies in Africa are thinking of ways to make money from their mobile money businesses. In 2021, TPG poured money into Airtel’s mobile money business and said it was worth $2.65 billion. MTN recently sold part of its fintech business to Mastercard and said it was worth $5.2 billion.
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