Experts seek revival of initial public offerings

Participants at the just-concluded 2021 National workshop of the Chartered Institute of Stockbrokers (CIS) have underscored the need to develop and revive the primary market segment to stimulate initial public offering (IPO) and new listings in the capital market.

The stakeholders, who lamented the long wait for IPO resurgence, noted that the segment is key to developing equity capital, which the Nigerian economy direly needs to create wealth and generate jobs for the youths.

The Director-General of the Debt Management Office, Patience Oniha, said efforts must be intensified to attract potential issuers to the country’s bourse.

She pointed out that the issuers currently in the market, are the regular names on the market over the years. According to her, the dearth of new issues in the market has impacted negatively on the diversity and depth of the market when compared to other emerging economies.

Therefore, she said attention must be focused on addressing the market need to entice those companies that are yet to be listed and make the capital market more robust.

“Where are the other names that should drive investment in the market. We cannot stay with these firms that we knew years ago. We need to broaden our horizons.”

A professor of the capital market, Nasarawa State University, Uche Uwaleke, said the major function of the capital market is to assist in capital formation and mobilisation of funds.

Uwaleke argued that IPOs’ resurgence would deepen the market and make it capable of providing the needed funds required to fortify the equity standings of several listed companies

He said the IPO has completely dried up, while few issues recorded in the market came from the government. According to him, when the government raises money and new companies float IPOs, the market would become more robust to play its capital formation role.

Commenting on the need for IPOs, the Vice President, Highcap Securities Limited, David Adonri, argued that for issuers to approach the market to raise capital, there must be some reasonable level of recovery in the economy to reverse the current lull in the market. He added that there was a need for the government to initiate strategic policies that would grow businesses in Nigeria, while stockbrokers must also ensure that issuers raise money in a manner that is competitive and less expensive.

“We need an economy where issuers can see growth. The growth must impact their businesses and it is when the business expands that companies can approach the market to raise capital.”

He charged the Federal Government to re-strategise and address current macroeconomic concerns impeding economic stability and promote issues of national development, to tackle prevailing stock market volatility, restore the market to sustainable rebound, and attract new issues to the nation’s bourse.

Since the global financial crisis of 2008 till date, no fewer than six companies have approached the market for IPO issuance.

However, the listing of Seplat Petroleum Development Company Plc., and Transcorp Hotels Plc., in 2015, ended several years of IPO drought in the capital market.

While Seplat’s, a global IPO, was 100 per cent successful, Transcorp Hotels recorded only 50 per cent subscription. After four years of zero record from 2015, the hope of a return of the era of IPOs was rekindled with the offer for sale of SAHCO Plc’s 406, 074, 000 ordinary shares of 50 kobo each at N4.65 per share in 2018. Since then, no company has approached the market for a new listing.