This marks an exciting turning point for Ethiopia’s economy and its approach to public sector investment!
This IPO is a huge leap forward for Ethiopia, paving the way for more public sector engagement and investment opportunities!
Ethiopia recently completed its first public offering (IPO), raising 3.2 billion birr, equivalent to 24 million USD, by selling 10% of shares of the state-owned telecommunication company Ethio Telecom. This event is significant for both the country and the market, marking a new chapter for the public sector in Ethiopia.
During the IPO, which lasted over four months, 10.7 million shares were sold at a price of 300 birr per share. Ethiopia Investment Holdings, which oversees 40 state-owned enterprises including Ethio Telecom, initially intended to sell 100 million shares to raise 30 billion birr. However, despite interest, the company fell short of its financial goals.
As stated by Frehiwot Tamru, CEO of Ethio Telecom, not all of the intended funds were raised due to restrictions on participation from certain investors. The Ethiopian diaspora and institutional investors were not allowed to participate in the IPO, which undoubtedly affected the overall amount of capital raised.
Impact of Restrictions on the IPO
Absence of Diaspora Participation: Excluding the Ethiopian diaspora, which often serves as a crucial source of investment in the economy, likely diminished interest in the IPO.
Exclusion of Institutional Investors: The inability to attract major institutional investors also limited fundraising opportunities and subsequently impacted the success of the offering.
Despite the current challenges, the IPO represents an important step for Ethio Telecom and the country as a whole. A successful entry into the stock market can pave the way for future offerings and attract foreign investments. However, several key factors need to be addressed for future plans to succeed:
Improvement of Investment Conditions: Ensure a more open environment for both local and international investors.
Development of Infrastructure: Increase investments in the technological and physical infrastructure of the company.
Government Support: Active government support in the form of incentives and programs may enhance the appeal of the company to investors.
While the IPO of Ethio Telecom did not meet its ambitious goals, it confirmed Ethiopia's desire to transition towards a more open economic model. It is crucial for the government and the company's leadership to work on improving investment conditions, which could lead to successful future offerings and heightened investor interest.
