Airtel Money listed on the stock exchange with a valuation of £5.3bn: why shares quickly dipped despite huge demand and Mastercard

Airtel Money began trading in London with a valuation of £5.3bn, or about $7bn. Investors bought the placement with a large oversubscription, but already in the first hours an unexpected turn occurred: after rising to £2, shares fell below the placement price of £1.96.

The initial public offering (IPO) became one of the largest for the London Stock Exchange in recent years and an important test for a market that has long lacked large new companies.

Existing Airtel Money shareholders sold 270 million shares at £1.96, raising about £529 million, or $703 million. If the additional option is fully exercised, the offer size could increase to £582 million.

Demand was huge, but shares still went down

Before the start of trading, the placement was oversubscribed several times: investors filed applications for significantly more shares than the company and its owners offered to the market.

At the start of conditional trading on 9 October, Airtel Money shares rose to about £2, which was more than 2% above the placement price.

But then quotes reversed. By mid-trading day, the shares cost about £1.93 — already below the original £1.96.

The result was a notable contrast: high demand made it easy to place a large block of shares, but after the start of trading the market did not raise the company's valuation.

Why this placement is important for London

The London Stock Exchange has been experiencing a decline in initial public offerings for several years. Some large companies prefer New York, where they expect to get a higher valuation and access to more investors.

Against this background, the arrival of Airtel Money became one of the most notable new listings on the British market. The company received a valuation of £5.3 billion and came close to the group of large British public companies.

For London, the future fate of Airtel Money is important not only in itself: a successful debut could become an argument for other international companies that are choosing between the British and American exchanges.

Who got $703 million

There is an important nuance: Airtel Money itself did not receive new money in the course of the main placement.

Investors were sold existing shares owned by minority owners of the company. Therefore, about $703 million goes to the selling shareholders, and does not go directly to the development of Airtel Money's business.

Among the company's minority investors are the Qatar Investment Authority (QIA), the payment system Mastercard and investment company TPG.

Mastercard additionally provided up to 27 million shares for the additional placement option. If it is fully used, the total offer size will increase to £582 million.

The majority owner Airtel Africa retains control of the company and said it intends to remain a long-term strategic shareholder.

What is Airtel Money

Airtel Money is one of the largest mobile financial services systems in Africa. It operates in 13 sub-Saharan African countries and serves about 53 million active users per month.

Through the service, one can transfer money, pay for purchases and bills, top up mobile communication, withdraw cash through agents, and use other financial services.

Mobile money is especially in demand in countries where a significant part of the population does not have a traditional bank account. The phone and a network of agents effectively replace a bank branch for such customers.

According to the company, the annual volume of payments through the platform exceeds $200 billion.

Mastercard and Qatar joined the company before the stock exchange

Mastercard and the Qatar Investment Authority became investors in Airtel Money back in 2021.

At that time, Mastercard, the Qatari fund, TPG and other investors invested a total of $550 million in the business. At that time, the company was valued at about $2.65 billion.

The current stock market valuation is about $7 billion. Thus, over five years, the value of Airtel Money by this estimate has grown more than two and a half times.

Mastercard meanwhile remains not only a shareholder, but also a commercial partner of Airtel Money: the companies cooperate in bank cards, payment acceptance and international money transfers.

Full trading will begin later

On 9 October, so-called conditional trading in Airtel Money shares began under the ticker AMC. At this stage, transactions are available primarily to investors who received the securities during the placement.

Official inclusion of the shares into the main market of the London Stock Exchange and the start of normal unconditional trading are expected on 14 October.

Therefore, the first price fluctuations do not yet determine the further fate of the placement. But the start has already shown an important detail for investors: even an IPO heavily oversubscribed by demand does not guarantee growth of shares after they enter the stock exchange.

Based on materials from: London Stock Exchange, Reuters