Safaricom has so far attracted Sh191 billion from both local and foreign investors, surpassing the Treasury's target of Sh50 billion by nearly four times and making it Sub-Saharan Africa's biggest initial public offering.

The money counted so far represents 382 per cent subscription, as foreign investors put in a premium of 50 cents above the price set for domestic investors of Sh5.

The international price of Sh5.50, is expected to be the lowest price that will be quoted by those seeking to buy the share at the secondary market. Initial indications were that the international pool was receiving bids at between Sh6 and Sh6.50 per share.

It is, however, understood that the government had one eye on events after the share is listed in setting the international premium lower at 50 cents above the local pool price.

"The level of demand at the clearing price will ensure adequate after market support for the stock after the commencement of trading expected on June 9th 2008," the government statement said.

A manager at Suntra Investment Bank and another at Stanbic Investment Services had earlier said a high premium on the international pool would stifle capital gains after the listing.

The government said the IPO had exceeded its expectations in many ways.

"Upon completion, the Safaricom IPO will be the largest Sub-Saharan IPO ever completed surpassing those of SANLAM and Telkom SA (both from South Africa)," said Investment Secretary Esther Koimett in a statement.

"On a pan-African basis it will be the 3rd largest IPO after those of Maroc Telecom and Telecom Egypt," she added.

With domestic investors subscribing Sh115 billion, equivalent to an oversubscription of 254 per cent), they had already exceeded the set minimum for them to qualify for a further allocation of an extra 1.5 billion shares.

While local investors' initial allocation was 6.5 billion shares they can now get 8 billion shares as the foreign investors lose the 1.5 billion shares initially allocated to them.

In the prospectus the government had proposed that if the domestic pool was oversubscribed by 200 per cent, their shares allocation would be increased by up to 15 per cent of offer.

That translates to a subscription of 300 per cent or Sh97.5 billion for the domestic pool which has already been surpassed.

With foreign investors price set at Sh5.50, the amount received from them will be Sh11 billion, while the total from the domestic pool will be Sh40 billion making a total of Sh51 billion - Sh1 billion more than the minimum expected in the prospectus but Sh17 billion more than initially put in the 2007/8 national budget.

The massive oversubscription has spawned debate on whether the government can exercise th green shoe option where more shares than contained in the prospectus are allocated with permission of the Capital Markets Authority.

Safaricom house

A source closely involved in the transaction but not authorised to speak for the IPO said the option could not be considered because the cabinet needed to have set aside more shares in advance for the sale than the 25 per cent it allowed.

"You would need to go back to the cabinet which has to offer more shares. The cabinet approved 25 per cent of the total shareholding," he said.

He said that under many jurisdictions, the custom is to have up to 15 per cent more shares allowed to be offered under the "green shoe option".

But it does not enjoy widespread support even in Kenya. Bob Karina, MD of Faida Investment Bank, said that the option of increasing the percentage floated to the public is not appropriate because it would deny the market the appetite it needs for higher prices once trading begins.

Further, Mr Karina explained, the government would get less money than would be the case if it waited for the share to realise its value - probably a higher one - before floating another tranche.

But Charles Ocholla of Suntra Investment Bank said it can be a good idea - the hitches being that it would need new approvals from the boards of directors at the Safaricom and the Capital Markets Authority - as it can mean more shares for the investing public.

If Kenya had the option of following such a custom, then the sale would be for an extra six billions shares worth Sh30 billion.

On the international roads shows, the Treasury and Privatization Commission accompanied Safaricom's management meeting prospective investors in London and Johannesburg.

The local tranche of the transaction, where processing is still going on, initial indications suggest that more than 750,000 applicants participated but the Treasury stressed that the "final results in the local pool will only be known over the next few weeks once application processing is finalized."

Allocations are expected to be announced on May 30, 2008, while electronic crediting of CDS accounts and dispatch of shares is expected to commence by June 4.

Following the IPO, the public will hold 25 per cent of the issued ordinary share capital of Safaricom, with the Government holding 35 per cent and Vodafone Kenya's shareholding remaining unchanged at 40 per cent.

However, Vodafone Kenya shareholding itself remains a controversial subject with Vodafone Plc holding 87.5 per cent and a shadowy company called Mobitelea having the rest.

Neither the Government and Vodafone Kenya Limited can sell any further shares for a period of at least six months following the IPO, the Treasury emphasised yesterday reiterating a clause that was initially included in the prospectus.