Centum eyes CMA waiver to aid share buyback plan
Centum Investment Group CEO James Mworia. Centum Plc will seek a waiver of a share buyback rule limiting the number of shares it can mop up in a single trading day in a bid to maximise the outcome of its planned Sh600 million stocks repurchase plan amid a sluggish market.
Listed investment firm Centum Plc will seek a waiver of a share buyback rule limiting the number of shares it can mop up in a single trading day in a bid to maximise the outcome of its planned Sh600 million stocks repurchase plan amid a sluggish market.
The company said it would seek an exemption from a rule by the Capital Markets Authority (CMA), which limits any firm buying back its stake from purchasing over 25 per cent of its stocks within a single day, citing thin trading volumes in a bearish Nairobi Securities Exchange.
“There are two things that are prescribed by the guidelines. One is the price range and the second is the volume of daily traded shares that the firm can buy. It is 25 per cent or any other percentage as may be prescribed by CMA and that is what we will be seeking exemption for because, given the very low trading volumes, 25 per cent may be very low,” Centum Plc executive officer, James Mworia told Daily Nation in an interview.
Centum plans to buy back up to 10 per cent of its shares from the market, translating to 66.5 million shares, at a maximum price of Sh9.03 apiece share which translates to a 10 per cent premium over the weighted average price of the last 30 days.
Share buyback
A share buyback occurs when an issuing company pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private investors.
A company could repurchase its stake for various reasons including reducing the cost of capital, ownership consolidation, preserving stock prices, undervaluation, and boosting its key financial ratios. Despite its current heavily discounted share, Centum said it is not on a mission to turbocharge its share price.
“We are not on a mission to rescue the share price. What we have seen from the Nation Media Group share buyback is that even if you buy at a higher price, the share price can still drift back and this meant that value was transferred from the remaining shareholders to the existing shareholders. This is why we want to stick to the prescription of the regulation around 10 per cent above the average weighted price. All we are doing is availing liquidity,” said Mworia.
Nation Media Group undertook a share buyback programme that ran between June and September 2021 and saw the company mop up 17.1 million shares representing 83 per cent of the target volume.
