Welcome to ‘Finance 101’; your go-to guide and bi-weekly series for breaking down complex finance jargon!
If terms like mutual funds, bonds, or REITs sound like a foreign language, you’re not alone. Trust me, my head used to hurt just thinking about them! 😅 Many people find navigating the world of finance confusing. That’s why we’re here, to demystify even the most mind-boggling financial concepts while keeping things fun and engaging. Because honestly, as we like to say in Naija, “I cannot come and kill myself”. Join us on this journey to boost your financial knowledge and invest in that future! 🚀
You might have seen headlines like "Flutterwave files for IPO" or "NNPC revives long-delayed IPO..." and wondered: What exactly is an IPO, and why do people get so excited about it? Let’s break it down, InvestNaija style.
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First Things First: What is an IPO? 🤓
IPO stands for Initial Public Offering. It’s the first time a private company opens its doors to the public by selling shares on the stock market. Think of it as a company saying, “Hey, we want to grow bigger come be part of our journey.”
So instead of being owned by a small group of founders, investors, or family members, the company is now owned by the public (retail investors) including you, if you buy shares.
A Quick History Lesson👩🏾💻
The concept of IPOs isn’t new. The first known IPO happened in the 1600s, when the Dutch East India Company offered shares to the public. In Nigeria, one of the most well-known IPOs was MTN Nigeria's in 2019 valued at about ₦1.83 trillion (~$5.8 billion then), which allowed many Nigerians to finally become shareholders in one of the biggest telecoms companies in Africa. Over 6.6 million Nigerians now hold shares in MTN through the NGX (Nigerian Exchange).
How Does an IPO Work? (Step-by-Step) 👟
- The Decision: A company decides it wants to go public.
- Hire Experts: They bring in investment banks to underwrite (basically, help manage) the process.
- Regulatory Filing: In Nigeria, they file paperwork with the SEC (Securities and Exchange Commission) and NGX (Nigerian Exchange).
- Valuation: The company and bankers decide how much the company is worth and how many shares to offer.
- Roadshows: The company pitches itself to potential investors to build hype.
- Pricing: They agree on a share price based on demand.
- Launch Day: Shares go live on the exchange. Anyone can buy them (if you’re fast enough).
Why Do Companies Even Go Public?👀
- Raise Money: For expansion, paying debts, or launching new projects.
- Public Credibility: A public company is usually more trusted.
- Liquidity for Founders/Investors: Early investors can now cash out their shares.
Pros of Investing in an IPO📝
- Early Entry: You get in at ground level before the stock potentially rises.
- Growth Potential: IPO companies often have ambitious plans.
- Sense of Ownership: You're now part-owner of a brand you believe in.
Cons of Investing in an IPO🚨
- Volatility: Prices can swing wildly after listing.
- Limited Info: You may not have the full picture of the company’s health.
- Hype Over Substance: Some IPOs are driven by FOMO (fear of missing out), not facts.
So, Should You Invest in an IPO?🙃
Here’s the truth: IPOs aren’t guaranteed money makers. Some soar, others stumble. Ask yourself:
- Do I understand what the company does?
- Is the IPO price fair or overhyped?
- Can I handle the risk if prices fall?
If you answered yes, you might be ready. If not, it’s okay to watch and learn.
Can Anybody Invest in an IPO?🤔
In Nigeria, yes! Through platforms like PrimaryOffer which is owned by Chapel Hill Denham many IPOs are open to retail investors (a.k.a. regular people, not just big-money institutions).
Where Does Your Money Go?🙆🏾♀️
If it’s a primary offering, the money goes directly to the company. If it’s a secondary offering, it goes to existing shareholders who are selling their stake.
How Is an IPO Priced?📈
IPO pricing is part art, part science - it involves financial analysis plus market psychology. Companies and underwriters look at things like:
- Revenue
- Growth potential
- Industry trends
- Demand from investors (during the roadshow phase)
From there, they agree on a share price. But remember: high demand doesn’t always mean high value.
📦 Case Study: MTN Nigeria’s Record-Breaking Public Offer (2021)
In 2021, MTN Nigeria launched Nigeria’s largest-ever public offer for everyday investors.
🎯 Why This Matters
- Early access to strong companies can deliver significant returns
- IPOs offer both capital growth and income via dividends
Key Takeaways
- IPO = First time a company sells shares to the public.
- Great way to own part of big companies early.
- But it comes with risks, hype, and uncertainty.
- Do your homework before jumping in.
- Monitor performance post IPO by keeping up with quarterly results and news.
- Be patient: IPO investments often take time to mature.
Potential IPOs in 2025 to Watch For
While timelines can shift, here are a few Nigerian IPOs investors are keeping an eye on:
- Flutterwave 🧾 – CEO GB Agboola has announced team reshuffles, new independent directors, and tighter governance all part of a push toward being “IPO-ready” over the next 10+ years. No set date yet, but this one’s gathering serious momentum! Watch this space. (Onukwue, 2024)
- NNPCL (NNPC Limited) 🛢️ – According to Nairametrics, the IPO process has reached its final approval stage, meaning retail investors could soon get a chance to buy in. With NNPC’s massive role in the energy sector, this listing could be game-changing for those looking to invest in long-term infrastructure and oil exposure. Stay tuned!
- Tizeti 🛜 – According to Tech Cabal, Tizeti, the fast-growing broadband provider, has officially filed for an IPO on the NGX. The move aims to fund network expansion and customer growth. No firm launch date yet but if you’re eyeing Nigeria’s digital infrastructure boom, this is one to watch. Keep it on your radar.
- Dangote Fertilizer and Dangote Refinery🛢️ – Nigerian billionaire Aliko Dangote has postponed the initial public offerings (IPOs) of Dangote Fertilizer to Q4 2025 and Dangote Refinery to 2026, shifting from earlier plans for a dual listing beginning in early 2025. (Daba, 2025)
Stay tuned. The IPO scene in Nigeria is only getting hotter and with the right knowledge, you’ll be ready when opportunity knocks.
Final Note:
An IPO can be a golden opportunity if you play it smart. Don’t follow the crowd blindly. Follow the information, the value, and your own financial goals.
Because at InvestNaija, we don’t just help you invest. We help you invest intentionally.
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