Telecom giant, MTN, together with four banks are putting the Ghana Stock Exchange (GSE) to what can be described as a historic test – via the combined amount of GH¢4.67 billion they are seeking to raise within a space of six months, leading to concerns that it will dry up investor funds for future transactions.
While the banks are seeking a total of GH¢1.19 billion from shareholders – with the breakdown being Societe Generale (GH¢170 million), Access Bank (GH¢450 million), the Agricultural Development Bank (GH¢310 million), and Republic Bank (GH¢255 million), MTN is seeking GH¢3.48 billion for 35 per cent of the firm.
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The five institutions are aiming at using the Ghana Stock Exchange to raise the highest amount of capital within the same time in the almost three-decade history of the bourse – a quest whose success in raising the desired amounts will further establish the Ghana Stock Exchange as a large exchange capable of containing multiple multibillion cedi transactions concurrently.
However, depending on the composition of the inflows, the success of the offers could either serve as a source of respite for the cedi, or present it with a hurdle.
Increased inflows from foreign investors could smoothen out ongoing blips and help bring the cedi into short term stability. On the other hand, strong repatriation of dividends, as in the case of MTN, could increase the shocks – further dragging the depreciation.
“Every market has a certain capacity. There is only so much that a market can absorb at a time.” – Dr Sam Mensah, CEO, SEM Capital Management
At a time when there’s low confidence in the banking sector, MTN’s IPO will serve as an alternative to prospective buyers, and in that regard, Dr Mensah who is a former Chairman of the Ghana Stock Exchange Council considers it a “high risk” for the banks to be coming in stating that “the banks are taking a risk by coming to the market at this time because of the fact that there is so much coming up. By the time the MTN IPO is over, it would have taken out most of the money in the system. So if banks are relying on this to recapitalise, then everybody has to have a plan ‘B’ so that if this does not succeed, then they can fall on that”.
The banks are seeking to raise money in order to meet the Bank of Ghana’s (BoG’s) new capital demand that requires banks to recapitalise to GH¢400 million by December 2018 or risk being penalized.
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