Companies
Kenya Airways defends extension of shares trade freeze
Monday March 25 2024
Kenya Airways has defended the continued suspension of its shares from NSE and other bourses, arguing that the move was to enable the company to complete its operational and corporate restructure process. PHOTO | SHUTTERSTOCK
Kenya Airways has defended the continued suspension of its shares from the Nairobi Securities Exchange (NSE) and other bourses, arguing that the move was to enable the company to complete its operational and corporate restructure process.
The national carrier is also cross-listed on the Dar es Salaam Stock Exchange and Uganda Securities Exchange.
While arguing that the reason that led to its suspension of trading of its shares in July 2020 still exists, the airline added that the move was meant to protect the interest of shareholders, especially the minority ones.
The national carrier said in an appeal pending before the Capital Markets Tribunal that the airline is still engaging potential strategic and financial investors, and has retained the services of advisors to guide the process.
“The reason subsists. It is the manner of the restructure process which has been modified due to considerations beyond the 1st Interested Party’s (Kenya Airways) control such as the legislative process, the view of the public and those of the government,” the airline said in response to the appeal.
When the NSE first suspended the shares from trading, it announced that this was due to the imminent operational and corporate restructure of the airline and its buyout by the government.
The buyout has not occurred and the government still retains its 48.9 percent stake in the company. The NSE, meanwhile, has extended the suspension of trading of the carrier’s shares multiple times in a series of decisions that have denied minority investors liquidity of their holdings.
Mr Mihr Samir Thakar, a shareholder, challenged the extension of the suspension for another one year, arguing that it was unjustified.
Read: Kenya Airways shares trade freeze extended for a year
The Capital Markets Authority (CMA) announced the extension of the trading freeze on Kenya Airways (KQ) for an additional year, the sixth time in a row. The latest extension was made on December 15, 2023 for another 12 months.
KQ defended the extension stating that the government has continued to engage the company concerning the restructure, despite the change of leadership of the executive branch of government.
The airline said the company had seen significant progress being made in its recovery journey from massive disruption caused by Covid-19 pandemic with global travel confidences showing significant signs of near full recovery.
The biggest challenge for KQ then remained addressing the funding or capital gap which was a key focus of the restructuring plan, the airline said.
The CMA, which has been named as a respondent in the appeal, said the suspension of shares is not subject to public participation because the capital markets regulator has the legal authority to suspend trading of shares, to maintain market stability and protect investor interests.
The regulator said the suspension was meant to protect the interest of investors including those of minority shareholders.
“The prevailing circumstances related to KQ’s share price-which are still existent required the respondent to retain the suspension of trading of KQ shares for periods that the respondent deemed fit in accordance with Regulations 22(3) of Public Offers, Listing and Disclosures 2002,” CMA said.
The CMA said the suspension was sought and granted within the provisions of the regulatory framework of the capital markets in Kenya.
Further, the CMA said the extension was meant to maintain market integrity and protect investors, especially in circumstances such as KQ’s where there was heightened risk of abusive or manipulative practices.
Mr Thakar challenged the extension accusing the CMA of abusing a discretionary power which allows the regulator to suspend trading of shares in listed companies.
The trader said CMA was being biased against minority investors holding shares at KQ.
“That the Respondent erred in law by making a decision which was taken with an ulterior motive and purpose calculated to prejudice the legal rights of the Appellant and other minority investors,” he said.
The national carrier’s shares were initially suspended from trading at the NSE in July 2020 after Members of Parliament began to review a law that would allow the government to take over the loss-making airline.
Read: Foreigners extend flight with Sh178m NSE January exits
The second extension was made on September 4, 2020 as the NSE said the company was yet to finalise on its operational and corporate restructure for the eventual government buy-out, following the publication of the National Management Aviation Bill, 2020 on the 18th June 2020.
“Notice is hereby given on the extension of suspension from trading of KQ Plc shares. The extension of suspension seeks to enable the company to complete its operational and corporate restructure process,” said NSE in a statement.
