Companies continued search for actual price tag for their equities, the long processes required before an Initial Public Offering (IPO), and listing requirements are among the factors slowing the IPO market, Arunma Oteh, director-general, Securities and Exchange Commission (SEC), has said.
Oteh, who said this during an interview at WIMBIZ programme held last week in Lagos, said: “The reason the IPO market has been slow to take off everywhere in the world is that if I am selling my company for the first time, I have invested a lot, so I want to get the greatest value. When valuation was depressed, it would have been difficult for people to come to the market. What we are seeing today is that people starting to look at the market again for valuations and where they feel comfortable enough to come in.”
According to the DG SEC, “the second thing is that the process of an IPO is a very long process and one of the things that make it different from the past in terms of IPOs is that you have to meet certain requirements like IFRS.”
She said: “If you were a company that was not reporting under IFRS, you need to go and fix that first and it is very elaborate process to change from Nigerian Gap to IFRS. It takes time and we don’t want a company to come to the market if they are not ready. The third thing is that we had listing requirements which would not enable any company to come to market except the company has been in business for a long time. If you note the history of Nigeria, a lot of companies that have come to the market is because of regulation. We had the indigenization Decree where the multinationals had to reduce their shareholding and allow Nigerians to participate, then we had the Privatisation; then we had the increase in capital for banks.”
Oteh noted that, “this is the first time that we had regulation that is supportive for someone who has a great idea, has a great technical plan to come to the market.”
“The alternative securities market in Nigeria was non-existent because it is very hard for you to have a track record before you start a business. Today the changes in the listing requirements allow certain kinds of companies to come to the market. The Exchange has also been good in becoming much more market oriented because in the past when there is a regulation, everyone has to come to the market, they sat back until someone came to the market. But now, they have a Market Development Directorate where they go out, educate companies about why it is good for them to come to the market,” Oteh noted.
Speaking on the new minimum capital requirement, she said “the SEC is very comprehensive when it does anything.”
“Many of you may know that in 2007, I had not joined the SEC but I read some of what journalists wrote. The SEC had asked for capital requirement to be raised and that was foiled. When I joined in 2010, as fallout of the global financial crisis, the SEC staff felt that we need to raise the capital requirement primarily because there were accusations of people selling customer shares without authorisation, people holding on to the proceeds of sale and all kinds of accusations. My colleagues noted that we need an immediate response.
