The share closed on Wednesday trading at Sh22.50, valuing the firm at Sh907 billion which is equivalent to 47 percent of the Sh1.95 trillion total market capitalisation of listed firms at the NSE. The stock has lost 41 percent of its valuation since the beginning of 2022.
At its peak in mid-2021, when its share price touched an all-time high of Sh44.95, Safaricom accounted for up to 63 percent of the NSE’s total investor wealth after defying the Covid-19 storm that battered stocks at the market.
Crossing the 50 percent threshold meant that Safaricom’s market worth exceeded the combined valuation of all the other listed companies.
This raised market concentration concerns given that the top five firms in the market —Safaricom, Equity Group, KCB, EABL and Co-operative Bank— were accounting for more than 80 percent of the NSE’s valuation, while also dominating daily trading volumes.
This has now fallen to 73 percent following the Safaricom share slide.
The Capital Markets Authority (CMA) regularly flags the influence the top firms have in terms of traded activity and investor wealth as market risk.
Should such companies encounter a shock or fall into difficulties, the effect on the stock market would be far more pronounced.
This top-end concentration of market wealth has partly been caused by a lack of large listings at the NSE in the past decade, combined with a prolonged bear run that has seen investors seek safety in large blue chip stocks, protecting their valuations compared to thinly traded smaller companies.
These stocks have also attracted continued investor appetite—both local and foreign— due to the continued payment of dividends, owing to their profitability.
Safaricom’s net profit for the six months ended September however fell by 10 percent to Sh33.5 billion on the impact of a cut on the mobile termination rate (MTR) and higher costs associated with the entry into Ethiopia, dampening hopes of higher dividends for the financial year.
The company also pointed to a tough macroeconomic environment for the slowdown in earnings, where high inflation arising out of global shocks has slowed down consumer spending.
Total revenue rose by 4.6 percent to Sh153.4 billion in the period, helped by an 8.7 percent increase in M- Pesa revenue to Sh56.9 billion, and an 11.3 percent jump in data earnings to Sh26.3 billion.