mukiha.....
"SCOM has NEVER sold shares to the public!!
Therefore SCOM cannot buy them back!!
GoK is the one you should be talking about...it was the one that sold shares during the IPO..
If that were to happen, the balance sheet of SCOM would not change an inch!![/quote]
MR MUKIHA..
It is Safaricom shares trading, its not GOK shares, get this right what is trading is Safcom equity however you wanna look at it.
Also Safcom did sold shares to the public to raise Capital, that capital was used to pay the GOK out of the company.
Therefore Safcom can buy back its shares but does it have money to do so? Probably not, why? strategically Safcom is a growing company, if Safcom decide to use all its retain earnings to buy back stocks, the company will have shift from its strategy at a crucial phase in the industrial cycle and could lead to lose of market share and profitability. Do you think Safcom wanted to go public? of course not, no company want to go public coz equity financing is more costly than debt financing. Did they have a choice? NO, the GOK wanted out, its owned 60% of equity and the 40% was owned by the parent company, so if the parent company had a debt:equity of 2:3, Safaricom before IPO had appx 16% of debt finance and needed additional 60% of debt to avoid IPO thats a total debt of 76%.... you see impossible no bank will offer you any loan with that debt: equity so the only option was IPO.