To List… or Not to List…

Quelling your fears and taking your company public

stock-exchange“Go public? no way!”

That was how a client responded to my suggestion that his company make “going public” part of their medium term plan.

As a background, the company began as a small indigenous oil servicing company, providing O&M (Operations and Maintenance) services to the Nigerian upstream oil and gas sector.  Over ten years, the last three of which we have worked with the company, advising on business and financial strategy, the company has grown remarkably and is currently one of the fast growing integrated energy groups in the country. Despite its achievements, the company cannot be said to be top of its league, in terms of recognition and credibility on the international scene and still finds it difficult to attract financing, especially much needed foreign investment.

As part of a broad strategy for financing the company’s current projects, which included hybrid capital sourcing options, we considered private equity type funding with a plan for listing as exit strategy for investors.

It is to this plan that the client raised his objection.

This is not the first time this particular client has expressed his aversion to taking his company public. He is also not the only one I know who has this perspective. There are several young entrepreneurs who have grown their companies and should be eyeing the next level which going public can take their firms. Yet they do not want to go beyond being a private small firm.

Recently, I was at a dinner organized by the Nigerian Stock Exchange where the CEO of a pharmaceutical company that recently listed shared his experience and jocularly taunted one of his competitors – the CEO of another pharmaceutical company – who is remarkably opposed to publicly quoting her firm.

So, what really brings this fear of going public?

An obvious issue for many business owners, especially in Africa, is probably the need for perpetual control. Many businesses started as a “one-man” sole proprietorship, where the owner enjoys total control and freedom. The prospect of going public may bring the scary perception of loss of that control and liberty to “do your own thing” and many business owners will rather not consider public quoting as an option, even with its attendant benefits. For some, perhaps it is the increased exposure to scrutiny and the burden of regulatory compliance to which a public company will be exposed.

But going public has many benefits, some of which include:

1. Better Access to Capital:

Raising capital through an Initial Public Offering (IPO) may be a good alternative to debt (borrowing), which exposes a company to greater risks. Equity is long term capital which is not expected to be repaid. Even after going public, the company is likely to be more attractive to new capital, whether debt or additional equity because it provides new investors with added psychological comfort than a private one.

For new equity capital, since the company’s stock is priced, there is a benchmark against which new capital can be raised which may allow the company access capital cheaply. Also, being publicly quoted, the company’s stocks can be traded and therefore investors enjoy a degree of liquidity on their investment and have ease of exit. For debt, investors expect that a publicly quoted company is subjected to increased regulatory compliance and therefore will be more transparent, and be more insulated from risks.

2. Greater Business and Product Visibility:

Because of the publicity that goes with an Initial Public Offer (IPO) and / or listing on an Exchange, there is greater awareness about a company and its products and it can provide access to new customers and partners.

3. Use of Stock to Make Acquisitions and Expansion:

A public company can use its stock to finance acquisitions or mergers with other businesses and facilitate growth. Because of the nature of such transactions, historically such acquisitions have been less expensive and easier for public companies.

4. Exit or Retirement Strategy for Founders

One of the biggest benefit which entrepreneurs should consider is that, by going public, a founder creates an avenue to recoup his investment in the business and if desired, retire early and pursue other interests.

5. Liquidity for the Company Founders, Shareholders and Other Investors

Equity holding in a public company is fungible. It can be converted to cash and can even be exchanged for other assets. It is much more liquid than equity in a private company. For all investors in the company, including the founder, the liquidity of their asset is facilitated and financial flexibility is enhanced. For instance, accessing credit using quoted stock as collateral is easier.

6. Greater ability to attract talent and excellent workforce:

A quoted company, due to the expected level of operational efficiency occasioned by regulatory compliance, can be more attractive to the labour market. Moreover, employee stock options and estate planning can serve as part remuneration for senior officers and reduce cash exposure at point of hiring. This gives a public company advantage in attracting and retaining high quality employees over a similar private company.

7. Credibility and Prestige

Being publicly listed provides a company and its founders greater visibility, credibility and prestige with its various stakeholders including customers, employees, competition, the press, and the entire financial community – local and international.

8. Enhanced Net-worth:

By taking their companies public, entrepreneurs immediately enhance their measurable net-worth. This increase may be so substantial that such entrepreneurs become overnight billionaires. Africa’s richest man, Aliko Dangote, is so acclaimed largely on account of his net-worth through his companies which have gone public.

9. Legacy and Business Immortality:

Going public is a good cure for Entrepreneurship Mortality in Africa. Presently, you can hardly name an indigenous firm which is up to 70 years old in Nigeria. A publicly quoted company stands the chance of outliving its founders.


Going public may not be the solution to all of a company’s problems. As a matter of fact, going public may expose a company to newer challenges; some of which include compliance requirements with regulatory provision and compliance sometimes, come at high costs. Also, the added pressure of the market (on stock prices) may push the company and its management into murky waters, as the pursuit of short-term results to aid share prices may impede long term growth.

All said, the advantages of going public, especially for mid-sized companies poised for the next level, may outweigh the challenges identified.

Author: Diekola Onaolapo
Diekola is a finance professional with sound industry knowledge and a remarkable depth of experience. Diekola’s career includes experience from financial institutions, such as Citibank, and IBTC (now Stanbic IBTC, a member of the Standard Bank Group) where he managed international trade for public sector and large corporate clients, including telecommunication companies and manufacturing conglomerates. Before co-founding Eczellon Capital, Diekola was an Executive Director at Bluebird Capital and oversaw the advisory services and issuing house business of the company. Prior to Bluebird Capital, he worked with FutureView Financial Services Limited as Head, Advisory Services Unit, where he structured various M&A transactions and capital issues during the 2005 consolidation exercise in the Nigerian banking sector. He has also been involved in a lead role on various PPP and public sector projects including power sector privatization, federal and state road concessions, and the establishment of industrial parks. He is an expert in corporate finance, business and financial advisory.

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