Kenya’s Nation Media Group gets regulatory approval for share buyback

Nation Media Group (NMG) has recently received regulatory approval for a share buyback plan, which has seen the company's share price skyrocket by nearly 90 percent since the announcement. The board of directors of Nation Media Group recommended that the firm's shareholders effect the Share Buyback plan by way of open market purchases through the Nairobi Securities Exchange (NSE). This move comes after NMG's share price had been on a downward trend for the past five years, with a 60 percent decline in market capitalization in 2020. Robert Karuiyi, an investment research analyst at Cytonn, shared insights on the potential impact of this strategic decision. The share buyback plan is seen as a way for Nation Media Group to signal its faith in the business and capitalize on the opportunity to generate gains. The company recently launched Nation Digital, a digital platform aimed at staying relevant in the evolving media landscape, especially in light of the shift to digital platforms accelerated by the COVID-19 pandemic. By buying back shares that are believed to be undervalued, NMG aims to increase value for its shareholders through capital gains. The increase in share price following the announcement indicates growing investor confidence in the company's future performance. In the past three months alone, NMG's share price has gained 15 percent, with a significant 11.3 percent increase in a single day of trading. This positive momentum has attracted new investors and heightened interest in the company's stock. By offering to buy back shares at a price higher than the current trading value, Nation Media Group is positioning itself for potential market cap growth and enhanced shareholder value. The share buyback initiative marks a significant development on the Nairobi Securities Exchange, where such strategies are relatively uncommon. While companies typically list on the stock market to raise capital, initiatives like share buybacks underscore a commitment to create value for existing shareholders. Although this practice is more common in advanced markets like the US, NMG's pioneering move could pave the way for other companies on the NSE to explore similar strategies. Standard Bank, through its subsidiary Stanbic Bank, is one such company that has hinted at a similar approach to enhance shareholder value. The success and investor response to Nation Media Group's share buyback plan are likely to set a precedent for other companies on the NSE. The plan is subject to shareholder approval at the upcoming annual general meeting scheduled for 25th June. Given the positive market sentiment and potential for value creation, it is expected that shareholders will approve the proposal. If successful, this could prompt a wave of similar initiatives from other companies seeking to unlock hidden value in their stock prices.