Opay’s Botched $303 Million IPO Foretell Foreign Listing Challenges for Nigerian Companies
The recent impediment faced by Opay Digital Services Limited (Opay) in undertaking a $304 million Initial Public Offer on the New York Stock Exchange (NYSE) may signal the level of challenges Nigerian companies are likely to face as they seek listing on stock exchanges with global profiles.
Foreign bourses, particularly those with global appeal, like the NYSE and the LSE have stringent conditions that many Nigerian blue chips may struggle to meet constraining their ability to raise funds in key foreign capital markets.
Meeting the thorough requirements for listing has always been a challenge for companies in emerging markets, most of which operate in environments with accommodating and less scrutinizing regulatory conditions.
Companies with opaque and inadequate disclosure standards have also been, at different times, forced to delist as American regulators seek to enhance transparency and accountability standards in their capital market.
Technology and financial companies from China and notable Asian countries have been forced to delist or have their listing applications rejected on account of unverifiable information and suspect compliance standards, under the United States Holding Foreign Companies Accountable Act (HFCAA). The Act requires foreign companies listed on U.S. stock exchanges to submit to independent accounting inspections.
A key provision of the act requires the Public Accounting Oversight Board (PCAOB) to inspect the accounting firms that are used by foreign public companies to audit their financial statements, under the Sarbanes-Oxley Act.
Regulation standards for listing on American stock exchangesbecame particularly tight after the promulgation of the Sarbanes Oxley Act in 2002 by the United States Congress. The act was necessitated by the desire to protect investors and restore market confidence following the collapse of giant corporations like Enron, Worldcom and Tyco.
Although some Nigeria has some of its firms listed on foreign bourses such as the London Stock Exchange (LSE) and the Johannesburg Stock Exchange (JSE), the country does not any on the NYSE which is the most liquid stock exchange in the world with a market capitalization of about $37 million and 2,500 listed companies.
A listing on NYSE or Nasdaq, the Chicago based stock exchange which are primarily patronized by technology firms for listing, offers companies the opportunity of accessing capital on a global scale. Market analysts believe that listing on such exchanges will engender a higher level of investors’ confidence that may enable Nigerian companies to raise more capital than they would have raised at home.
