What is all this fuss about QII’s?

By Business Daily
Investment banks in Kenya have been classified as Qualified Institutional Investors (QIIs) in past initial public offerings (IPOs).

This classification has enabled them to buy loads of shares in their own names for onward allocation to their retail clients.

According to the Safaricom IPO prospectus, QIIs are identified as licensed collective investment schemes, investment banks, retirement benefit schemes, and life insurance companies.

The classification of applications for different investors has become hugely significant in recent IPOs as they determine the success of an investor getting a good chunk of shares applied for based on reservations for the respective categories.

Segmentation of applicaions for the various categories of applicants was necessitated by the outcome of the 2006 KenGen IPO that left institutional investors furious after they were allocated an equal number of shares with retail investors despite having applied for millions of shares.

Investor categorization has lately gained clout owing to the high demand for shares by small investors in IPOs that are coming to the market as part of government’s privatisation programme. This has diminished the pool of shares available to big investors, forcing investment banks to cushion their high net worth clients from being forced to take back huge chunks of their money in refunds.

Other application categories in the ongoing IPO in addition to the QIIs include the international applicants, retail applicants, Safaricom employees and authorized Safaricom dealers.
—Washington Gikunju