The Co-operative Bank IPO is here with us. From Thursday October 30, the bank is inviting you to make an offer on the 701 million shares it’s offering to the public in order to raise Kshs6.7 billion. Unlike the Safaricom issue, it is not a privatisation where the main shareholder has chosen to get out. Cooperative Bank is seeking to raise money to invest in expansion.

Under the Banking Act, there are limits to the amount of money a bank can collect from the public in terms of deposits. Indeed capital-to-deposits ratios restrict the level of deposits, which a bank can collect from the public. The Co-operative Bank of Kenya is at a point in its growth curve where it cannot engage in any meaningful expansion and growth without a massive capital injection.

The more that bank has in terms of share capital the more it’s able to do business with ease as it can lend more. This translates to a better P&L (profit and loss) and hence good returns to its shareholders.

However, even as we discuss the merits of the IPO there is widespread fear that this initial sale might not achieve its goal, at least at this period in time. Who will subscribe to the offer is the big question especially with skittish Kenyans who form the bulk of retail investors.

Co-op Bank IPO is tied to Safaricom’s in the sense many investors have learnt a few lessons albeit not positive. The success of this IPO will hinge on how fast Safaricom investors are willing to forget the bad experience. Many retail investors, and who make IPOs lively, have not forgotten that barely six months into trading Safaricom share has shed 30% of its listing value.

In addition, analysts are predicting a bumpy ride for the mobile phone shareholders, as more investors are willing to offload the stock at any price. This has been witnessed day in and out as supply exceeds demand even as the price goes below the listing price.

Investors have not forgotten the problem with the refunds. Some lost theirs through the confusion while many complained of the process having taken too long. Who can forget the queues snaking in Nairobi streets and the shoving and jostling as investors made their applications?

But what pains most investors is the expected profits which didn’t materialise. Billed as the largest IPO south of the Sahara, there was false optimism that the share would hit a high of Kshs15 and make a new breed of millionaires, just like the KenGen IPO did in mid 2006.

It is not only the retail investors who had misplaced their ambitions. Financial institutions led by banks came on board to finance its customers and are reaping big. And with the share below the listing price, there is widespread panic from all corners as banks try to readjust their non-performing loans in line with the new reality.

Going into the festivities, there is some feeling on the ground that investors might choose to forgo the IPO in readiness for December holidays and January school fees commitments. This argument does not hold water. Despite the high rate of inflation Kenyans are still engaging in their favourite past times i.e. drinking and partying. Money then is not issue. What should be on discussion is how much investors will afford to put in.

Safaricom’s shortcomings are a positive for Cooperative Bank. As of today, no bank, even Equity, has indicated any plans to finance the IPO. We are then going to see only serious investors as opposed to Safaricom where financial institutions went out of their way to dole cash to investors.  And serious investors are what is needed to streamline the Nairobi Stock Exchange.

Many retailers who got in did so for the simple reason that money was available. We can relate this to the speculative attitude adopted by retail investors since KenGen days.

Perminus Wainaina is the CEO of Concept Advisory Services, an investment adviser and stocks agent for African Alliance. He can be reached at perminus@conceptadvisoryservices.co.ke