One of the fastest growing regions for IPOs is Africa. Investors, particularly those in the tech sector, should take note.
There has been a global downturn in the number of tech IPOs taking place. Take Canada, for example: it’s last big IPO was in May 2015, when Shopify (NYSE:SHOP) went public in a $131 million IPO. Therefore, it’s incredibly exciting to hear of a region with a hot IPO pipeline.
In 2016, this region is Africa. With about $3.1 billion expected to be raised from IPOs this year alone, the continent is turning out to be one of the top areas for IPOs in the world.
IPO milestones for Africa
The Financial Times has reported that African stock market flotations are on their way to reaching their highest level since 2010, when $4.4 billion were raised in IPOs. Since then, the region has really struggled, hitting a low of $320 million in 2012. Therefore, to hear that the region has 16 upcoming IPOs in the works is significant news.
According to Edward Bibko, head of the Europe, Middle East and Africa capital markets practice at Baker & McKenzie, “there’s enormous pent up demand among issuers to conduct capital raisings, particularly in Egypt, which is showing strong growth and the emergence of a larger middle class.” Investors, take note.
Understanding the trend
Africa is an immense continent, and IPO activity isn’t happening equally across the board. For instance, Egypt is a particularly hot market right now, with seven Egyptian companies anticipated to IPO in the coming months. Meanwhile, areas like sub-Saharan Africa haven’t seen a major influx in IPOs. The relative quiet in this region may be attributable to the after effects of a commodity price rout which shook the market.
The pipeline companies are concentrated by sector, in addition to geography. For instance, the majority of Egyptian companies ready to IPO appear concentrated in the food, real estate and financial services sector. Across the region as a whole, there is a clear turn away from energy and power companies towards new up-and-coming tech innovators.
For example, InterSwitch Ltd could become one of Africa’s largest IPOs in history. The Nigeria-based company is an integrated digital payments and commerce company that facilitates the electronic circulation of money and exchange of value. The Africa-focused company began in 2002 as a transaction switching and electronic payments processing company that builds and manages payment infrastructure and delivers innovative transaction services and payment products.
So far, the company has raised an impressive $1 billion in capital. Rumor has it that the company is set to IPO this year, after founder and chief executive Mitchell Elegbe announced last June that he was looking at an IPO in Lagos and London. However, there’s a chance that the company might hold off until the first quarter of 2017. The Financial Times reports that Dolapo Oni, head of energy research for sub-Saharan Africa at Ecobank, believes that the current funding environment will cause the company to wait.
This article was first published on March 24 on Technology Investing News.
Securities Disclosure: I, Morag Mcgreevey, hold no direct investment interest in any company mentioned in this article.