Investment

Why HF Group’s Rights Issue Is The Opportunity You Can’t Ignore

BY Steve Biko Wafula · December 4, 2024 03:12 pm

KEY POINTS

KEY TAKEAWAYS

You may wonder, “Why not wait and buy shares in the open market?” The answer lies in the discount. Shares offered through the rights issue are priced at KES 4.00 each, compared to the market price, which may be significantly higher. This discount represents an immediate gain for participating shareholders, making it a highly attractive investment opportunity.

On October 25, 2024, HF Group PLC, with the approval of the Capital Markets Authority (CMA), launched a landmark financial strategy: a Rights Issue allowing for the issuance of up to 769,228,336 ordinary shares at KES 4.00 per share. This bold move also includes a “green shoe” option to issue an additional 346 million shares should demand surpass expectations. But what does this mean for the average investor, and why should you care?

A rights issue is a powerful financial tool that public companies use to raise capital from their existing shareholders. Unlike a public offering, a rights issue is exclusive to those who already hold shares in the company. Shareholders are granted the right, though not the obligation, to purchase additional shares at a discounted price, in proportion to their current holdings. For HF Group, this means shareholders have the unique opportunity to buy new shares at KES 4.00 each—a notable discount compared to prevailing market prices.

For HF Group, this rights issue isn’t just a fundraising exercise; it’s a strategic step to accelerate its investment in HF Limited’s business expansion and digital transformation. By raising KES 4.615 billion, HF Group aims to bolster its mortgage and banking operations, providing better services to its customers while staying competitive in a dynamic financial landscape. The proceeds will also facilitate growth in its investment segments and enhance its digital proposition.

Existing shareholders are at the heart of this rights issue. This offering ensures that they can maintain or even increase their ownership stake without facing dilution from external investors. For every two shares you already own, HF Group is offering you one new share at the discounted price. Additionally, the green shoe option allows up to 346 million extra shares to cater to oversubscription, further expanding the opportunity for shareholders to participate.

Key dates are crucial in this process. The register closes on November 1, 2024, meaning only shareholders on record by that date are eligible to participate. The rights issue opens on November 13, 2024, and closes on December 9, 2024. Shareholders must act promptly within this period to exercise their rights.

For those who may not want to exercise their rights, there’s an option to trade these rights on the Nairobi Securities Exchange (NSE). This creates liquidity for shareholders who may wish to sell their entitlements to others, enabling those interested in HF Group’s growth story to join at a favorable entry point. This flexibility ensures the rights issue benefits both active and passive shareholders.

A common question surrounding rights issues is whether they indicate a company’s financial distress. For HF Group, the answer is a resounding no. This rights issue is a growth-oriented strategy designed to capitalize on emerging opportunities in the financial sector. By raising capital through existing shareholders, HF Group is reinforcing its commitment to sustainable growth without over-reliance on debt.

The rights issue also demonstrates HF Group’s alignment with its major shareholders. The group’s largest shareholders have already committed to taking up their full rights, showcasing confidence in the company’s future. This should inspire similar trust among smaller shareholders.

Another question often asked is about dilution. If shareholders choose not to exercise their rights, their ownership stake in HF Group may diminish as other investors purchase the newly issued shares. However, participating in the rights issue ensures you maintain your proportional ownership and benefit from the company’s growth trajectory.

The use of proceeds from the rights issue also speaks volumes. HF Group has outlined clear, strategic objectives for the capital raised. Investments in digital transformation and business expansion are poised to enhance profitability, improve customer experience, and secure long-term sustainability.

The timetable of events provides clarity for shareholders. After the rights issue closes on December 9, 2024, allocation will occur on December 18, with results announced on December 20. By December 23, shares will be electronically credited to investors’ CDS accounts, and trading of new shares will commence on December 24, just in time for the holiday season.

For first-time investors, this rights issue serves as an excellent entry point into HF Group’s ecosystem. By purchasing rights from existing shareholders or directly exercising entitlements, new investors can join a company on the brink of transformative growth at a highly discounted price.

For seasoned shareholders, this is an opportunity to increase your stake in a company with a proven track record and ambitious plans for the future. The discounted price and potential for capital appreciation make this an attractive proposition.

So, why should you act now? Beyond the obvious financial benefits, participating in this rights issue demonstrates confidence in HF Group’s strategy and vision. It’s a vote of trust in a company that has consistently delivered value to its shareholders.

This rights issue also fosters inclusivity. By targeting existing shareholders, HF Group ensures that the benefits of its growth are shared among those who have supported it through the years. It’s a rare opportunity to grow with the company you already believe in.

Therefore, HF Group’s rights issue is more than a financial event; it’s a strategic move designed to benefit shareholders, customers, and the company itself. By acting now, you can secure your stake in HF Group’s future and enjoy the rewards of its continued success. Don’t let this opportunity pass you by—your financial growth could very well be tied to HF Group’s bold vision.

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters. He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com