The Effect Of Initial Public Offer On The Stock Exchange Market In Uganda A Case Study Of National Insurance Corporation ( Nic) Ltd

ABSTRACT

The objective of this study was to establish the effects of Initial Public Offer to the stock exchange market in Uganda. This study was specifically looking at a case study of National insurance Corporation Uganda (NIC) LTD, The management of public offers is significant to investors, issuers and the government, which in this case represents the interests of the masses and Welfare improvement, in the process of analyzing the price

patterns, to proactively manage their portfolios and develop strategies that lead to superior gains on the market and improved welfare. A Public offer if properly executed has the potential of raising large sums of inn money that would otherwise not be possible through borrowing, and also improving incomes of

the citizens through such kind of investments. When the masses get involved in planned or unplanned investment, it means that they do not leave large sums of their

incomes lying in the banks, but put it in productive use thereby improving their income distribution.

An initial Public Offer however is not always a smooth sail. There are various I risks and costs associated with floating shares; both to the issuers and the investors. As more and more IPO's flooded the market in the recent years, there was need to be wary of the imminent risks associated with IPOs and not necessarily stocks trading in the secondary market. There are various

Opportunities to accelerate growth and take a big step for the companies towards achieving their usual vision of market leadership. However, alongside this natural excitement lies the reality of life on the public markets, the impact Such a process has on the investors as well as government.

As a newly listed business, it's important for them to be aware of the risks, and prospects that they now face. These can range from:

• Presenting unexpected results to the market

• Uncertainties associated with new initiatives, such as global expansion

To achieve full potential and deliver on pre-IPU promises companies must have clear picture of the new environment- both the opportunities and the risks, it is also paramount that they communicate this to the investors, i.e. the risks and prospects that they put themselves in the line to face.

TABlE OF CONTENTS

APPROVAL ................................................................................................................ ii

LIST OF TABLES ....................................................................................................... 1

LIST OF ABBREVIATIONS ......................................................................................... 2

CHAPTER ONE ....................................................................................................... 4

INTRODUCfiON ....................................................................................................... 4

I .0 Introduction ....................................................................................................... 4

I Background of the case study ................................................................................. 4

1.3 Statement of the problem ................................................................................... 7

1.4 Scope of the study .............................................................................................. 8

1.5 General objective of the study ............................................................................. 8

1.5.1 Specific objectives ........................................................................................... 8

I 6 Research questions ............................................................................................. 8

I .7 Significance of the study ..................................................................................... 8

1.8 Conceptual framework ....................................................................................... 10

CHAPTER TW0 ..................................................................................................... 11

LITERATURE REVIEW .............................................................................................. 11

1.0 Introduction ................. , .................................................................................... 11

2.1 Definition of initial public offer ............................................................................ ll

2.2 History of Uganda stock exchange (USE) ............................................................ 11

2.3 Requirements for listing on stock market ............................................................ 13

2.4 Effect of NIC Share on the Ugandan market ........................................................ 15

2.5 Potential risk exposures arising out of an IP0 ...................................................... 16

2.5.1 Regulatory risks .............................................................................................. 16

2.5.2 Shareholder related risks ................................................................................. 17

2.6.3 Counterparty risks .......................................................................................... 17

2.6.4 Employee risks ............................................................................................... 17

2.7 Ways of Mitigating or Transferring the Risk ......................................................... 18

CHAPTER THREE .................................................................................................. 19

RESEARCH METHODOLOGY ..................................................................................... 19

1.0 Introduction ...................................................................................................... 19

3.1 Research design ................................................................................................ 19

3.2 Research population .......................................................................................... 19

3.3 sample size ....................................................................................................... 19

3.4 sampling techniques .......................................................................................... 20

3.4.1 Questionnaires method ................................................................................... 20

3.4.2 Interviewing Method ....................................................................................... 20

3.5 Data Processing and Analysis ............................................................................. 20

3.6 Limitations of the Study ..................................................................................... 21

CHAPTER FOUR .................................................................................................... 22

DATA PRESENTATION ANALYSIS AND DISCUSSION .................................................. 22

4.0 Introduction ...................................................................................................... 22

CHAPTER FIVE ..................................................................................................... 29

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............................................... 29

5.0 Introduction ...................................................................................................... 29

5.1 Background Information .................................................................................... 29

5.2 Effects of Initial Public Offer to the stock market in Uganda a case study of NIC Ltd

......................................................................................................... 29

5.3 Discussion ......................................................................................................... 29

5.4 Recommendations ............................................................................................. 30

5.5 Conclusion ........................................................................................................ 31

5.6 Recommended areas for further study ................................................................ 33

REFERENCES ........................................................................................................ 34

APPENDIX 1 ............................................................................. 36

(a)INTERVIEW GUIDE ............................................................................................. 36

b) QUESTIONNAIRE ................................................................................................ 37

APPENDIX 11 ......................................................................................................... .40

THE RESEARCH ESTIMATED BUDGET ...................................................................... .40

APPENDIX III ............................................................... .42

RESEARCH TIME FRAME WORK .............................................................................. .42