ADDIS ABABA UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS

IPO MARKETS IN AFRICA

NAME BEZAWIT ABRHAM GSE/6377/15

DEPARTMENT OF BUSINESS ADMINSTRATION

FINANCIALMARKETS AND INSTITUTION
DR. TEMESGEN WORKU

ADDIS ABABA, ETHIOPIA

MAY, 2023
Contents
IPO MARKET IN AFRICA .......................................................................................................................... 3

1. what is IPO market?............................................................................................................................... 3

2. What are the steps to be ready for IPO? ................................................................................................ 3

3. What are the IPO requirements in Nairobi Securities Exchange? ......................................................... 4

4. List the IPO requirements in Nigeria Exchange? .................................................................................. 4

5. List the IPO requirements in South Africa in Johannesburg Stock Exchange?..................................... 5

6. List the IPOs in Kenya over the last 10 years? ...................................................................................... 5

7. List the IPOs in Nigeria over the last 10 years? .................................................................................... 6

8. List the IPOs in Ghana over the last 10 years? ...................................................................................... 7

9. List the IPOs in NYSE over the last 10 years? ...................................................................................... 7

10. What are the challenges of IPOs in Kenya? ...................................................................................... 8

 IPO MARKET IN AFRICA

1. what is IPO market?

An initial public offering (IPO) is the first time a company issues shares to the public. This is when
a private company decides to go ‘public’. Initial Public Offerings (IPOs) refers to common stocks
issued by a privately owned company, to a large number of diversified investors (public) for the first
time through a primary market (Bodie, Kane and Marcus, 2010; Rudorfer, 2009).

2. What are the steps to be ready for IPO?

i.Finding an Underwriter or Investment Bank -Selecting an investment banking firm with a solid
reputation and the ability to distribute the initial shares to the target market the company desires, such
as institutional investors as compared to smaller or individual investors, is crucial.
ii.Due Diligence and Filing- A "prospectus" that will be used to inform the public about the IPO is one
of the documents for the IPO that the investment bank is entrusted with creating. At this point, the
Securities and Exchange Commission (SEC) requires the firm and the investment bank to file more
documentation.
iii.Setting a Price- The company's objectives, financial projections of its future development and
profitability, the state of the economy, and the success of the an advertisements will all affect
the price of the IPO stock. The investment bank will conduct a an advertisement to get feedback
from potential investors.
iv.Launching the IPO- Before an IPO may go live, the SEC must give its approval; however, once
the SEC does so and the firm and investment bank have agreed to all the terms including the
share price, the company is then prepared to begin trading. In order to let investors know when
to prepare to purchase shares, the IPO is frequently disclosed beforehand.
v.Stabilizing the Share Prices- Despite SEC regulations prohibiting stock price manipulation, such
regulations are suspended after the first IPO debut for a period of 25 days. The investment
bank is able to buy and sell shares throughout this period to maintain a favorable pricing for
their customer.
vi.Competing in the Market- The investment bank turns over control of the share price to the public
market at this stage, making the private firm completely public. Although the bank may
 continue to serve as a consultant to the business, the stock's price is now totally determined by
the market.

3. What are the IPO requirements in Nairobi Securities Exchange?

''Any company wishing to undertake an IPO in Kenya would have to get the approval from the
Capital Markets Authority before the IPO can be carried out. The Authority (CMA), in considering
an IPO proposal, takes into account compliance with the legal and regulatory framework by the
company undertaking the IPO. Once approved, the company is required to issue a prospectus that
tells about the company; what it does, how it has fared and how it expects to perform in the future.
The Capital Markets Act requires a certain level of disclosure. Under this Act the CMA is required
to ensure that the company offering the shares provides all the necessary information for investors
to make informed investment decisions.'' Francis,O.

4. List the IPO requirements in Nigeria Exchange?

According to LOYAL3, there are six steps that a company, which has decided to acquire the status
of an IPO go through (five are applicable in Kenya)

✓ Bank hiring
✓ Submitting documents to Nairobi Security Exchange
✓ Handing out the preliminary prospectors
✓ Going on a road show
✓ The agency mandated with the regulations of the stocks makes the statement public and gives
a go ahead for the purchases to be made.
When a firm becomes eligible for an IPO, the Nairobi Security Exchange (NSE) and Capital
Market Authority (CMA) start to monitor and investigate it. Therefore, the business is free to
reveal rules and regulations such as holdings, investments, and transactions of its personnel,
including the directors in charge of the business. The business is essentially under constant
observation, and both its financial and stock market trading operations are rigorously watched.
The business must also convene shareholders meetings and publicly disclose its financial data
on a quarterly basis before doing so for the entire year.
5. List the IPO requirements in South Africa in Johannesburg Stock Exchange?
The key regulations that are applicable to IPOs are the Johannesburg Stock Exchange (JSE)
Listings Requirements that regulate all companies listed or intending to list on the JSE, the key
regulator in this regard being the Issuer Division of the JSE. The JSE Listings Requirements are
secondary legislation, published by the JSE in terms of the Financial Markets Act 2012 (FMA).

Of equal importance in an IPO context is the South African Companies Act 2008 (the Companies
Act). The Companies Act is particularly important in that it regulates on what basis offers can be
made to the public in South Africa, and provides certain safe harbours in this regard. An offer of
securities (including equity and debt securities) to the public can be made only by a South African
public company or a foreign company (incorporated outside South Africa) that has filed its
incorporation documents with the Companies and Intellectual Property Commission (CIPC). A
public offer will also require the preparation and registration of a prospectus with the CIPC. The
Companies Act is also relevant if the offertory is a South African company, as it regulates, inter
alia, the manner in which the offering can be made and prescribes certain corporate governance
requirements that must be met by the issuer. The key regulators in relation to the Companies Act
are the CIPC and the Companies Tribunal.

Other key regulation includes the FMA, which consolidates the law relating to the regulation and
control of, inter alia, exchanges and securities, trading, central securities depositories (relevant for
dematerialized shares), the custody and administration of securities, market abuse matters,
restrictions on who may market securities, and ancillary matters. The primary regulator under the
FMA is the Financial Sector Conduct Authority (FSCA) (previously the Financial Services Board).

South Africa also has a system of exchange controls that seeks to regulate capital outflows from
South Africa. In an IPO context, this regulates, inter alia, the listing of shares of non-South African
companies on the JSE (inward listings). The primary regulator in this regard is the Financial
Surveillance Department of the South African Reserve Bank (FSD).

6. List the IPOs in Kenya over the last 10 years?

Kenya recorded the worst performance among African countries in terms of initial public offerings
(IPO), with its drought of transactions now in its sixth year, according to a new report by business
advisory firm PricewaterhouseCoopers (PwC). The last IPO was in 2015 when property
investment fund ILAM Fahari I-Reit was listed on the Nairobi Securities Exchange (NSE) after
raising Sh3.6 billion.

7. List the IPOs in Nigeria over the last 10 years?

Caverton Offshore Support Group (CAVERTON)
Caverton operates a fleet of helicopters and ships that provide logistics support to Nigeria’s
numerous offshore oil and gas rigs. The rationale behind the $197 million listing was to broaden
the company’s shareholding as it prepared to enter new markets in the region. Judging from the
price movement since its shares hit the market, the listing also allowed lots of existing shareholders
to jump ship. The stock dropped precipitously immediately after the May IPO and now trades 47%
lower than its offer price.
Computer Warehouse Group (CWG)
With operations in Nigeria, Ghana, Cameroon, and Uganda, CWG is the largest ICT company to
list on the Nigerian Stock Exchange. Providing IT infrastructure and support to banks has been its
key area of focus. CWG systems handle 60% of all banking transactions in Nigeria. Its $86 million
IPO in November 2013 was well-received initially, but after a lackluster start to the 2014 fiscal
year the shares dropped 9% below the offering price.

Infinity Trust Mortgage Bank (INFINITY)

An Abuja-based mortgage lender, Infinity listed on the NSE in December 2013. It plans to expand
its footprint into other large cities, developing residential properties, and helping to address
Nigeria’s huge housing deficit. The company is also one of a few key stakeholders in the Nigeria
Mortgage Refinance Company, a new entity which will package mortgages into securities for sale
to pension funds and other large institutional investors.

Seplat Petroleum Development Company (SEPLAT)

Market Cap: $2.32 billion

Seplat holds a 45% stake in three big Nigerian oil fields. When it successfully raised $500 million
during its April IPO on the Nigerian and London Stock Exchanges, it became the first upstream
oil company to list on the NSE. Management intends to use the IPO proceeds to acquire onshore
oil assets cast off by international energy companies eager to leave the Niger Delta region. The
shares have fared well post-listing and are now up 18%.

8. List the IPOs in Ghana over the last 10 years?

Mega African Capital (MAC)

With a market cap of just $8 million, Mega African Capital isn’t very big, but it is the first
Ghanaian IPO since the 2008 listing of UT Bank. The investment company takes long-term stakes
in publicly-traded African stocks. It’s got an experienced management team with an enviable track
record. The partners helped set up and manage EPACK, a top-performing Ghanaian mutual fund.

9. List the IPOs in NYSE over the last 10 years?

According to stock analysis web reporter there have been 6,002 IPOs between 2000 and 2023.
The least was in 2009 with only 62. The full year 2021 was an all-time record with 1035 IPOs,
beating the previous record of 480 in the year 2020.

As an example we can see

Didi

IPO date: June 30, 2021

Money Raised at IPO: $4.4 billion

Valuation at IPO: $73 billion

Some Investors: Toyota Motor, SoftBank Vision Fund

The story of Didi’s IPO is one of triumph and tragedy (OK, maybe that’s a little dramatic). The
Chinese ride-hailing giant went public over the summer, raising $4.4 billion and earning a
valuation of $73 billion. But soon after the IPO, the Chinese government cracked down on Didi,
essentially stopping new downloads of its app, which drove down its stock price. Didi’s stock has
suffered since its public debut, and the company announced plans to delist from the New York
Stock Exchange less than six months after its IPO.
10. What are the challenges of IPOs in Kenya?

✓ Overpricing contributed to low subscription

✓ Unsold security and delay in IPO timing.
✓ Insufficient clarification of the role of the players in the IPO process has resulted in
duplication of efforts and unfortunate delays in processing.
✓ IT installation and operations are expensive and complex
✓ The capacity to ensure efficient and timely processing of information is uncertain

Reference

Bodie Z., Kane A. & Marcus A. (2010). Essentials of Investments. 8th ed. McGraw Hill.
Kunthara, S. (2021, December 17). These were the 10 largest public market debuts of 2021.
Crunchbase News.Retrieved May 20,2023 from: https://stockanalysis.com/ipos/statistics/

Retrieved May 19, 2023, from: https://www.theforage.com/blog/skills/ipo on 17/5/2023

Retrieved may 20, 2023, from: https://sokodirectory.com/2016/06/process-ipo-takes/

Rudorfer, M. & Schoon, S. (2009). Dual Track versus IPO, GRIN Verlag.