Airtel Uganda’s IPO initially offered modest discounts to investors (retail and institutional) to incentivise applications. But a significant change has now been announced.

For retail investors, discounts from 5 – 17% were initially offered (at various application levels). For institutional investors, the discount range was originally between 9 and 27%, again for differing share application levels.

With just days left of an extended offer period, the selling shareholder has announced significant increases to the free shares offered.

But only for institutional investors.

Institutional investors now stand to gain discounts up to 53% – “half price shares.” Yet retail investors see barely any increase in their potential discount.

Ironically, these preferential discounts upend the IPO’s original aims from the regulator’s view and could attract scrutiny about unfair and equal IPO access.

Earlier discount ranges (at varying application levels) aligned with typical IPO practices locally and abroad. However, 53% is exceptionally high compared to regular IPO pricing practices and particularly notable given the significant difference in entitlements.

Serious backroom negotiations must have happened with large institutional shareholders to enable such a material change to the prospectus. These are the kinds of discussions that should occur before an IPO, not after.

Will frustrated retail investors be able to withdraw applications after being more than proportionately priced out? Should regulators intervene on unfair practices, particularly given that the prospectus emphasises priority allocation for Ugandan retail investors.. “including oversubscription”.

If the latest incentives engineer an over-subscription, Ugandan Retail Investors would be required to receive full allotments of their overpriced shares following the disclosures in the prospectus (see section 7.12.9). Is this in their interests?

Post-IPO, Uganda’s capital markets will be distorted because the original spirit of the prospectus has been upended. Retail investors lose out while large institutions profit – the opposite of what the IPO intended for regular Ugandans.