Retail giant Choppies on Friday released a statement indicating that its bookbuild was strongly over-subscribed ahead of its anticipated share offer. Over subscription usually happens when there are more buyers than the available shares placed on offer.
Tlotlo Ramalepa, financial analyst at Motswedi Securities explained that the over subscription was likely brought about by the retail giant’s phenomenal growth as it continues to spread its wings throughout Botswana and the region. Ramalepa said the extraordinary expansion of the Choppies brand and its positive growth prospects may have generated excitement about its shares.
“The demand was incited by the reputation that Choppies has built,” he said.
It is generally believed that an oversubscription indicates that a higher price could have been charged, enabling the issuer to raise more capital. In the statement Choppies reveals that the total value of the 227 420 758 shares placed on offer is R1 359 million at an offer price of R 4.90 (P 4.03) per offer share. Asked if the shares were rightly priced, Ramalepa said it is difficult to determine if it was given that the shares on offer were enticed to a selected and limited group of investors.
“They were not made available for every ordinary investor, which makes their buying power different. Also, the offer price of R4.90 (P4.03) is a minor discount in comparison to the share price in the Botswana Stock Exchange, which is P4.16,” said Ramalepa.
On what he anticipates the share price movement will be after the inward listing which came into effect today, Ramalepa opined that it is a “wait and see” situation because it will depend on how flexible the investors are in terms of selling. The general trend is that the price tends to increase significantly as soon as it is made available in the market, especially if excited buyers showed a heightened demand for what was placed on offer. Ramalepa however observed that the Choppies share price may not necessarily increase if the selected group of investors decide to just hold on to the stock.