Tanzania aviation news – Precision Air IPO all but flops, largely undersubscribed

The signs were ominous from day one of the airlines IPO when several banks had to postpone the launch over lack of relevant documents and an ill timed announcement by the Tanzanian government about a planned revival of Air Tanzania did not help much either as it rattled investor confidence. Bounced earlier in the year, the IPO then was postponed over a frivolous winding up petition related to an alleged outstanding of around 100.000 US Dollars the airline then looked at later in the year but the IPO coincided with worsening economic date across Eastern Africa, with inflation and devaluation at the time hitting regular new records. Therefore, and when after the initially scheduled period an extension was announced heads rose up and took notice that not all was well and that the added time was to generate buyers interest across the border in Kenya too, following the eventual approval by the financial market regulators.
According to regulatory and other sources, nearly 6.700 offers for shares were received but only covered some 42.3 percent of the overall shares put on sale, missing the target to raise nearly 28 billion Tanzania Shillings by a very substantial margin, as the airline bagged just under 12 billion Tanzania Shillings.
This raises immediate questions over the financing of Precision Airs ambitious fleet and destination development plans, as a funding gap of 16 billion Tanzania Shillings now has to be addressed.
Airline officials put a brave face to the announcement and were swift to point to the subsequent IPO by Tanzania Breweries which is running from November 04 till November 25 and in contrast appears to be taken up with a gusto. Other mitigating factors were given such as the relatively late approval by the Kenyan financial regulators, a reason however rejected by financial analysts and industry observers, one of whom quipped: If they wanted to sell their shares in Kenya too, they should have sought a more timely approval and not extend the IPO, which sent all the wrong signals to the market.
Watch this space how the fallout of this disappointing IPO will affect the forthcoming issue of new shares of major shareholder Kenya Airways and generally influence the aviation market where the deck of cards appears to be in a shuffling stage right now.

3 Responses

  1. They never sought or wanted outside investors. All recent large IPO’s have created an East African catergory – but Precision, and TBL which may end the same, had only Tanznian or foreign – so brokers in Nairobi did not endorse it, and the regulator never addressed the Precision matter publicly (Did they even get an applicaton for sale in Kenya, Uganda and Rwanda? )