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A businessman has sued Capital Market Authority (CMA) over its recent decision to extend the suspension of trading in Kenya Airways (KQ) shares at the Nairobi Securities Exchange (NSE) for a further 12 months.

Trading of KQ shares at the bourse has been extended for an additional 12 months, effective January 5, 2024. Mihr Samir Thakar, a shareholder of the national carrier says in a petition filed at the Capital Market Authority Tribunal that the extension for one year is unreasonable and unjustified.

“l seek this appeal be allowed and the decision of the Capital Markets Authority be set aside with costs,” he says. The suspension of KQ’s shares from trading has trapped more than 77,000 small investors who are unable to liquidate all or part of their portfolio should they wish to.

In his suit papers, Thakar contends that CMA erred in law by not inviting the views of the general public and specifically shareholders while making such a huge decision. He adds that the recent extension of suspension was made without giving reasons for the same.

“The Capital Market Authority erred in law and in fact by being biased against minority investors holding shares at Kenya Airways,” Thakar who owns 71,075 shares of the airline states in his appeal papers at the tribunal. In addition, the trader faults CMA for abusing its discretionary power which allows it to suspend trading of shares in listed companies to protect shareholders and the general public.

According to the petitioner, the authority erred in law by making a decision which was taken with an ulterior motive and purpose calculated to prejudice the legal rights of the appellant and other minority investors. 

Restructuring process

In a statement issued earlier this month, CMA said the suspension of trading of KQ shares at NSE would allow the national carrier to complete its operational and corporate restructuring process.

“Notice is hereby given on the extension of suspension from trading of Kenya Airways Plc shares. The extension of suspension seeks to enable the company to complete its operational and corporate restructuring process,” the notice by CMA said. The airline’s shares at the bourse were first suspended in July 2020, when the government floated a plan to privatise the loss-making carrier.

The second extension was made on September 4, 2020, as the NSE said the company was yet to finalise its operational and corporate restructure for eventual government buy-out, following the publication of the National Management Aviation Bill, 2020 on June 18, 2020. The government of Kenya owns a 48.9 per cent stake in Kenya Airways while Air France-KLM has 7.8 per cent. The rest is held by private owners and banks.

Despite recording a 120 per cent improvement in operating profit from a loss of Sh5 billion reported in 2022 to Sh998 million operating profit in 2023, KQ’s net loss widened to Sh21.7 billion.

The airline’s improved performance was negated by a Sh17 billion impact on foreign exchange losses on monetary items, loans and leases, giving rise to a loss before tax of Sh22 billion.