Choosing the Right IPO Market for African Startups

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Should African startups IPO in the US or their local markets?

We all saw what happened to Jumia and Swivel.

Here are my thoughts on what lies ahead for Africa's future IPOs in markets like Nigeria and South Africa:

The main reason African startups consider US IPOs is access to a larger pool of capital.

This was never a bad decision, as it allows access to a larger pool of investors and a higher level of liquidity.

But, the performance of Jumia and Swivel could make African firms consider listing at home instead.

The issues with their IPOs weren’t necessarily the fault of the firms.

Instead, it was a perfect storm of several factors that were out of their control, including short-seller attacks, accusations of fraud, and misunderstanding of African markets.

I believe African startups should focus on their local markets for IPOs.

This will ensure regulatory compliance and minimize geopolitical risks.

Furthermore, it will encourage more local investment, retaining wealth in Africa.

But the reality is, African markets lack liquidity.

To solve this, I suggest a structured approach to secondary market trading.

A stock exchange for African startups that allows trading with little risk can incentivize local investment.

In addition, African startups should consider dual listings.

It enables access to global investors, while also maintaining a local presence.

This way, they can retain wealth in Africa while also achieving their growth objectives.

Finally, African startups should focus on building sustainable businesses.

This includes ensuring their financials are in order, creating value, and being profitable.

Investors are likely to invest in companies with solid foundations, ensuring long-term success.

In summary, African startups should consider local IPOs, structured secondary trading, dual-listings & building sustainable businesses.

This will ensure that wealth remains in Africa, minimize geopolitical risks, and enable them to achieve their growth objectives.

At the end of the day, it’s about building an ecosystem that can support local startups from idea stage to IPO.

If Africa can create a conducive environment for startups to thrive, they won’t have to rush to foreign stock exchanges to raise capital.

Let's build an infrastructure that supports African startups.

Nigeria, arguably Africa’s biggest tech economy, is looking to encourage startup listings on the Lagos-based Nigerian Exchange (NGX) with the launch of a new Technology Board.

If successful, the new development could offer many advantages to these companies such as access to capital, access to a larger investor base, and widely acceptable valuation benchmarks.

That’s it!

See you next Wednesday.

I'd love to hear from you:

What are your thoughts? Would you rather list your startup on the US stock exchange or your local stock exchange?

Tweet at me @euniceajim or reply to this email and I'll do my best to get back to everyone.

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