Flutterwave plans to list on Nigeria’s NGX, a significant move for the fintech company. Pros include access to capital and increased prestige. However, challenges such as lack of profitability, regulatory requirements, and challenging market conditions may pose risks. The firm must evaluate these factors thoroughly before proceeding with the listing.
Flutterwave, a prominent fintech company established in 2016 by Olugbenga Agboola and Iyinoluwa Aboyeji, is preparing to list on the Nigerian Exchange Group (NGX). This venture marks a significant milestone, as Flutterwave seeks to capitalize on its status, having achieved unicorn status in 2021, and expand its influence across Africa, including countries like Ghana, Kenya, and South Africa. While other fintech companies have successfully listed, Flutterwave’s young age raises questions about its viability in the stock market.
The proposed listing provides numerous advantages for Flutterwave, including increased access to capital and enhanced prestige associated with being listed on a stock exchange. Additionally, it would improve the company’s valuation transparency and offer liquidity for stock trading. For Nigeria, Flutterwave’s presence on the NGX would serve as a morale boost for the tech sector and could attract foreign investments through portfolio purchases.
However, Flutterwave faces challenges regarding profitability as reports indicate that the company has yet to achieve this critical milestone. In the Nigerian capital market, profitability is fundamental to attracting investments, and the prevailing high inflation rate diminishes investor patience, contrasting the tolerance seen in markets like the United States. This poses a significant concern for Flutterwave, potentially limiting its access to crucial low-cost capital lent by major funds.
Listing would also impose regulations and obligations Flutterwave must meet, including the provision of audited financial statements and a minimum shareholder count. Though the NGX has established a Technology Board with less stringent criteria, shares would only be eligible for qualified institutional investors, potentially excluding retail investors and complicating access to essential local capital.
Market implications are another concern for Flutterwave’s potential listing. Historical data suggests favorable conditions for companies listing on the NGX during economic booms, whereas recent listings have faced declining trading volumes, indicating a challenging liquidity environment. Understanding the current macroeconomic climate, characterized by a negative interest rate-inflation differential, is crucial, as it suggests investor reluctance toward riskier assets.
In light of these considerations, proceeding with the listing may pose significant risks for Flutterwave. Should it decide to move forward, the company might also explore avenues such as issuing American Depository Receipts (ADRs) to broaden its investor base beyond Nigeria and enhance its chances of success in the stock market.
In summary, Flutterwave’s intention to list on the Nigerian Exchange Group presents both opportunities and challenges. While the potential benefits include increased capital access and elevated company prestige, the hurdles surrounding profitability, regulatory compliance, and market conditions must be carefully assessed. Given the current macroeconomic environment in Nigeria, Flutterwave’s decision to proceed with the listing could prove to be a risky endeavor, urging consideration of alternative investment strategies to optimize its market entry.
Original Source: www.connectingafrica.com
