The MTN IPO must be the hottest IPO ever in Ghana. From the sheer size of this telecom giant to the ease of purchase (using MTN mobile money), the IPO has generated a lot of interest in the finance community and the general public.
But this interest in investing in the MTN stock makes me wonder why IPOs tend to generate so much excitement about investment that tends to end when the IPO is done. One would think the only way one could buy stock is through an IPO. You could always walk into a brokerage and buy stocks, so why does it look like people stop being excited after an IPO is done?
One could argue that an IPO represents the best opportunity to buy since a stock would only get more expensive after that date. But this flies in the face of finance theories about how stocks are valued. According to the popular Dividend Discount Model, a stock reflects the present value of the returns from the dividend that the stock will pay. So if the stock price rises, you should still buy it since that is only a reflection of the higher expected returns from dividends. And this model is more important in Ghana because the trading of stocks to take advantages of price changes is still relatively rare, and a buy-and-hold strategy is much more common. Thus dividends are more important than capital gains.
A more practical argument against thinking that one should only buy a Ghanaian stock during the IPO is the illiquidity of the Ghanaian stock market. If you follow my monthly update on the performance of stocks (click to see June 2018 performance) you would see that most stocks on the local bourse see zero changes in price from month to month. In the table below I show how the prices of some recent listings have changed up to close of trading on July 6, 2018.
| Stock | Trading Begins | Opening Price | Days since Listed | Price Change |
| MMH | 07-07-15 | 0.11 | 1095 | 0% |
| HORDS | 11-08-15 | 0.06 | 1060 | 67% |
| ADB | 12-12-16 | 2.65 | 571 | 125% |
| ACCESS | 28-12-16 | 4.1 | 555 | -2% |
| DIGICUT | 11-04-18 | 0.08 | 86 | 13% |
As can be seen, the capital gains from the stock does not necessarily rely on how long the stock has been listed. Even if the stock was to gain substantially a few days after listing, what are the chances that you can quickly offload the shares to someone else to make a significant profit after commission charges?
In conclusion, I do not think it is too late to buy a stock on the Ghanaian bourse after the IPO. My reasons can be summarized into the slow rate of price changes on the stock exchange; the importance of dividends as opposed to capital gains; and the assumption that stock prices reflect the future income from dividends and thus if the share price rises, it means one is expecting higher income from the dividends that the company would pay.
Empirical data shows that most often than not, stocks in Ghana at worst appreciate in price slightly and stagnates. In that regard, it is only prudent to get it during IPOs. And with the issue of dividends, for someone like me lol, I could barely care about dividends even though I’m more of a holder than a quick trader. So missing out on the IPO and watching the price soar will be something too difficult to handle, especially knowing I had the option of getting it earlier and for a cheaper price.
Your point about appreciation and stagnation after the IPO is valid. But if you do not plan to sell immediately, that price appreciation is too small given the long periods of stagnation that follow. You will be losing in real terms. Thus if you’re not buying to sell quick then dividends is what you should be looking at.