This archive report was first published on 6 July 2021.
On June 28, Nation Media Group (NMG) made history by launching a debut stock buyback plan in East and Central Africa. The company, listed on the Nairobi Securities Exchange (NSE), aims to repurchase 10% of its issued and paid-up share capital, approximately 20.7 million shares, within the next three months.
This innovative move marks the first time a corporate entity has implemented the share buyback option since the provision was incorporated in the Companies Act, 2015.
Corporate share buyback involves the repurchasing of shares by the company that issued them. This concept is common in the United States and Europe, and Kenya is now among the pioneers of this financial engineering in East and Central Africa.
Under this arrangement, investors who choose to sell shares back to the company benefit from a ready buyer willing to take the stocks at a premium. In the US, it is estimated that over 80% of the 500 companies constituting the S&P stock index buy back shares.
On June 25, NMG's shareholders approved the transaction, paving the way for the company to start buying back its shares through the NSE at a price of Ksh25 ($0.23) per share. The offer will close on September 24 or earlier if the company acquires 20,739,652 shares ahead of the deadline.
According to Wilfred Kiboro, the Group's chairman, the buyback program aims to enable shareholders to realize value and cash in at a reasonable price. He noted that last year was a challenging period for the company, with the share price declining from Ksh40 ($0.37) at the end of 2019 to Ksh16 at the end of 2020 due to volatility.
Since the announcement of the buyback program, NMG's share price has performed well at the Nairobi bourse, gaining 44% over the past month to close trading at Ksh25 ($0.23) on June 29.
Mr. Kiboro emphasized that the shares repurchased could be used in future mergers and acquisitions or share swaps, and would be kept as treasury shares, not attracting dividends, thereby increasing value for the remaining shareholders.
