Medium term performance of the initial public offering at Nairobi
The aim of the study is to test for the existence of IPO under pricing anomaly at the NSE. The central hypothesis under investigation in this study is that IPOs are usually under priced in the short run. The best-known pattern associated with the process of going public is the frequent incidence of large initial returns to investors in IPOs of common stock. The research methodology was based on an event study. This design is valuable for detailed analysis. The sample that was used in this study comprised of 18 companies, which issued and listed their shares at the Nairobi Stock Exchange between 1 January 1994 and 31 July 2007. The primary source of data was the NSE's IPO Database. The prices of the new issues at their launch and their respective prices at the end of first day, the fifth day, the tenth day, the fifteenth day, the twentieth day, the twenty fifth day and thirtieth day of trading were recorded. The daily prices were obtained from NSE's !PO Trading Database. A total of 18 companies were listed during the period under study. From the findings one can safely conclude that the 18 IPOs show a first day return ranging from -0.30276 to a high of 1.40399. HFCK Company shows the highest first day total return of 1.22476 followed by KenGen Company. Only Athi River Mining Company reported a negative first day total return of -0.30276.