The Capital Markets Authority (CMA) has granted Centum Investment Company Plc an exemption to exceed the 25 percent daily volume cap for its proposed share buyback program.
This rule is in place to prevent insider trading and ensure liquidity in the stock market. The exemption is crucial for Centum as their daily traded volumes typically fall below 100,000, which would result in a prolonged share repurchase process if the limit were to be applied.
“The company has been exempted from the limit under the guidelines to purchase no more than 25 percent of the average daily trading volume for the four calendar weeks preceding the date of purchase,” Centum told its shareholders.
In the quarter ending December 2022, Centum traded a total of only 3.4 million shares, averaging 57,948 shares per trading day. The company plans to buy back up to 66.5 million shares over 18 months at prices ranging from Sh0.5 to Sh9.03 per share.
According to CMA guidelines, the volume of shares purchased by a listed company on any single day may not exceed 25 percent or the limit prescribed by the regulator, and the repurchase must not negatively impact liquidity.
Centum’s share buyback program will begin on February 6 and is intended to address the company’s undervaluation on the Nairobi Securities Exchange. The repurchases may cost up to Sh600 million. Despite a net asset value per share of Sh59.8 in the six months ending September 2022, Centum’s share price is only Sh8.3. Share buybacks have the effect of reducing the volume of outstanding stock, potentially boosting market valuation and increasing the stakes of continuing shareholders.