This archive report was first published on 5 June 2020.
Kenya Airways, also known as KQ, has been struggling financially, with its share price plummeting 42% in the past week.
On June 5, 2020, the airline announced a net loss of Sh12.9 billion for the year ended December 2019, a significant increase from the Sh7.5 billion loss in 2018.
The latest loss has widened the company's negative equity to Sh17.9 billion from Sh2.5 billion at the end of 2018, highlighting the airline's capital crisis.
Shareholders who had quadrupled their gains to Sh19.7 billion during a one-month price rally in May have now seen their paper wealth decline by Sh8.3 billion.
Analysts attribute the price surge to speculation surrounding the planned nationalisation of the company, with some investors hoping to sell their shares at a premium.
However, corporate finance manager Johnson Nderi of ABC Capital notes that even if the government were to bail out or nationalise the airline, ordinary shareholders would be diluted, and their value would decrease.
“Even if the government was to bail it out or nationalise it, ordinary shareholders will be diluted one way or the other, and remember they have already been diluted already,” Nderi said.
“One must consider though that the downside for shareholders buying in is limited to what they put in, hence some are willing to take that chance on the stock.”
