Quickmart’s share price fell 7.9 percent to Sh8.26 on Friday as buyers offered lower prices following a rally in the initial trades upon Thursday’s listing on the Nairobi bourse.
The Sh0.64 decline in share price translated to a Sh2.56 billion drop in the company’s valuation to Sh33 billion, even though the stock remains above its IPO price of Sh7.50 per.
In its first day of trading on Thursday, the stock gained 19 percent to Sh8.90 per share.
Investors traded seven million shares of the retailer on Friday, giving it a turnover of Sh57.8 million, 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 of 625,103 shares at prices of Sh8.10 to Sh8.20, compared to sell orders of 23,421 units priced at between Sh8.22 and Sh8.44 per share.
‘Even though the initial listing rally signalled ample demand for the stock, the price could progressively settle towards the offer levels as this demand normalises,’ said Wesley Manambo, a senior research associate at Standard Investment Bank.
Quickmart’s price movement in its first two days in the market has tracked that of Kenya Pipeline Company (KPC) and Family Bank when they listed in March and June respectively, where the two firms followed up day one gains with a price correction in the second session.
KPC, 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.
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, as some investors cashed in on the capital gains recorded the previous day.
IPO shares are usually exempted from the usual price movement limit of 10 percent in the first day of trading upon listing, giving investors who sell on the day a chance 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 (IPO) 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 that underlined the demand for the offer, which was underwritten by global funds led by the World Bank’s International Finance Corporation (IFC) which took a stake of 6.49 percent in the retailer.
The three other anchor investors were UK government-backed fund MOBILIST (6.5 percent), US-based investment firm 337 Frontier (6.5 percent) and UK fund manager RWC LLC (4.32 percent).
Other Kenyan and East African Community (EAC) 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.
Foreign investors meanwhile received 235.2 million shares (5.9 percent stake) in the offer, having applied for 476.8 million units. They were allocated half of their applied units as the issuer prioritised satisfying the applications by local retail and institutional investors.