TRANSITION

Centum share drops marginally as investors mourn Kirubi

In Summary
  • The share traded at Sh15.75 on Tuesday, 1.87 per cent lower than Monday
  • In January, Kirubi bought 20% more stake in the firm to push his portion to 49%
Centum Investment board member Chris Kirubi and the firm’s managing director James Mworia at a past investor briefing held in Nairobi.
Centum Investment board member Chris Kirubi and the firm’s managing director James Mworia at a past investor briefing held in Nairobi.

The share price of Centum Investment, a Nairobi Securities Exchange diversified investment firm dropped marginally yesterday as investors following the death of business mogul Chris Kirubi.

The share traded at Sh15.75 on Tuesday, 1.87 per cent lower than Monday when it closed the day at 16.05. Kirubi who died Monday aged 80 years owns almost 50 per cent stake in the company. 

Although the firm's share has shed 44 per cent over the past 12 months, it had embarked on the growth trajectory starting May 28, gaining daily to recover from a low of Sh14.50. 

Dennis Nyamweya, a stock market analyst however dismissed the drop as normal, saying a Sh0.30 drop in price is too minimal to be linked to the death of the majority shareholder.

"That is a small margin. A 10 per cent drop would have been alarming. Let's monitor the share price for another month to determine Kirubi's influence on the NSE listed entity," Nyamweya said. 

Early this year, Kirubi purchased an additional 5.75 million shares of Centum Investment Company with a current market value of Sh92.2 million, pushing his stake from 30.9 per cent to 49 per cent.

At 49 per cent stake in a diversified firm with interests in real estate, private equity and marketable securities, Kirubi was less than two per cent shy of becoming a majority shareholder with veto powers. 

Although the stock analyst delinked Kirubi's death to the slight drop in the company's share price at the Nairobi bourse, studies suggest otherwise. 

The latest study by the University of Warwick in the U.K revealed that the death of a founding entrepreneur wipes out on average 60 per cent of a firm's sales and cuts jobs by roughly 17 per cent.

It adds that these companies have a 20 per cent lower survival rate two years after the founder's death compared to similar firms where the entrepreneur is still alive.

"We expected businesses that experienced the death of a founder-entrepreneur to have some kind of a dip in performance immediately after the death owing to the upheaval, but we anticipated there would be a bounce-back," Sascha Becker, a co-author of the study said. 

In 2019, Kenya’s telco giant Safaricom Plc shares dropped by 2.7% per cent to Sh27.35  after the company announced the death of its then CEO Bob Collymore.

The firm's share price had grown by at least 400 per cent since Collymore took over from Michael Joseph.