FMR LLC, a prominent American multinational financial services firm and one of the top five investors in Kenya’s Safaricom, is significantly reducing its stake in the company by selling off millions of shares. This decision follows a delay in dividend repatriation and has led FMR to decrease its Safaricom shareholding from 921.1 million shares as of September 2022 to approximately 314 million, as reported by BusinessDaily.
Despite this, Safaricom announced that it will be paying an interim dividend per share of KSh 0.55 ($0.0038) in February 2024. This payout marks a slight reduction from the previous dividend of Sh0.58 ($0.0040) per share and signifies the second year in a row that Safaricom has maintained this payment plan. The telecom company’s board approved the interim dividend during a meeting held on 21st February 2024.
The process of selling off shares by FMR LLC reportedly commenced in the last quarter of 2022. The decision was influenced by delayed dividend payouts, largely due to the scarcity of dollars in the Kenyan market, which has greatly impacted the company.
The report suggests that the primary motive behind FMR’s decision to reduce its stake in Safaricom is rooted in the delays experienced in the repatriation of dividends. This occurrence is viewed as a contravention of the financial service firm’s internal policies, as it would be for other foreign investors as well.
The inability to receive scheduled dividends and sale proceeds can have dire consequences for foreign investors, more so those such as pensions, endowments, and asset managers, who have regular distribution obligations. When foreign investors face such an issue, it is normally seen as a significant warning sign that prompts them to withdraw their investments. FMR’s recent move should thus be read in this context.
In December, FMR LLC, trading under the name Fidelity Institutional Asset Management, liquidated a significant chunk of its investments in Safaricom, letting go of 92.5 million shares. This accounted for a notable 61.3% of the 150.99 million shares of Safaricom traded during the same period. The selloff resulted in a substantial drop in Safaricom’s share price from KSh 29.82 ($0.21) in September 2022 down to KSh 13.30 ($0.092). This price fall represented a significant contraction in market valuation for the telco, shrinking by 55% from KSh 1.19 trillion to KSh 532.9 billion.
FMR however is not alone in reducing its shareholdings in Safaricom. Other international investors including Harding Loevner LP, Nikko Asset Management Americas, and Wellington Management, all based in the United States, have also reportedly sold off some of their holdings in the Kenyan company.
