Going public is one of the most significant transformations most companies are likely to go through in 2025, though it seems to be a daunting task.
Many promising market indicators in 2024 paved the way for an optimistic 2025 IPO outlook. The NGX All Share Index (ASI) closed 2024 with +37.65 percent return, suggesting robust investor confidence. Also, the Dow Jones Industrial Average broke past the 40,000-point milestone.
Despite Nigeria’s market impressive growth, challenges remain. For instance, a Proshare 2025 market outlook indicates that Nigeria’s capital market continues to grapple with high transaction costs, information asymmetry, monetary tightening, low trading volumes, and wide bid-ask spreads, all of which stifle liquidity.
However, the report underscores the potential of leveraging the equity market through the listing of national assets, such as NNPC, to unlock liquidity and stimulate domestic and foreign investment.
Indian-based Gretex with expertise in offering services including IPO assistance, noted recently that opportunities abound for the IPO market in 2025.
“In the world of Initial Public Offerings (IPOs), trends are shaped by economic shifts, market confidence, and sectoral growth patterns. 2024 has seen a remarkable resurgence in IPO activity, signaling a potential golden era for companies preparing for public listing.
“The year has been marked by an impressive 80 percent increase in IPO volume compared to 2023, with $18.5 billion raised in the first half alone. As we turn our gaze to 2025, market conditions indicate continued opportunities for companies with strong fundamentals, clear growth strategies, and the adaptability needed in today’s dynamic economic environment,” Gretex noted.
“The IPO market is set to offer promising opportunities for companies across various sectors in 2025. For businesses contemplating an IPO, now is the time to refine growth strategies, highlight ESG goals, and ensure financial readiness”, Gretex further said in a December 31 note.
Looking into 2025, market conditions indicate continued opportunities for companies with strong fundamentals, clear growth strategies, and the adaptability needed in today’s dynamic economic environment. This is because in the world of Initial Public Offerings (IPOs), trends are shaped by economic shifts, market confidence, and sectoral growth patterns.
Looking at the “Capital Markets in 2025”, a PwC report focusing on the changing dynamics in global Initial Public Offering (IPO) activity, the survey respondents noted that liquidity is by far the most important characteristic when choosing a market on which to list.
Choosing the right market to list on is one of the many decisions a company will have on its agenda but it has the most long-term implications.
“However, many scenarios are possible. In particular, market participants are aware that there are major factors that could derail any shift to the ‘East’, or at least limit the extent of any shift.
“These include: whether appropriate regulatory environments will evolve; whether political conditions will remain stable and the perceived intervention by government; whether a robust and defined market infrastructure will develop; and whether sufficient liquidity is available,” according to the report where survey respondents painted a very clear picture of the challenges facing developed markets.
Read also: Here’re 7 things IPO candidates must do before going public
More than half of the survey respondents believe that, by 2025, developed market companies will be looking to some degree to emerging market exchanges, rather than the established financial centres for their IPOs, “as they aim to tap into the vibrant growth of the world’s emerging economies”.
Many believe that the shift has already begun, with 27 percent of respondents saying that Western companies are looking to list in emerging markets. “This appears to fit with what many market participants are experiencing in practice,” according to the report.
Diverging economic expectations are likely to have profound implications for the development of equity capital markets.
Also, the economic growth and increasing financial sophistication of emerging markets mean that competition between stock exchanges is intensifying. Also, the focus of IPO activity is shifting East. However, there are factors that could derail the shift to emerging markets.
Also, 74 percent of respondents said that in 2025, emerging market companies will look to another emerging market instead of a developed market for a secondary listing.
Companies from the East are expected to dominate the IPO pipeline in 2025. China is predicted by around 80 percent of respondents to be the home of most new issuers in 2025 and also to raise the most capital in 2025. India comes second in terms of issuers, but third in terms of capital.
Of stock exchanges in the BRIC countries, Brazil and Russia lag China and India. While 38 percent of respondents think that Indian exchanges will be an important listing destination for foreign companies in 2025, just 11 percent of respondents believe that Russia will increase in popularity as a listing destination. Brazil, with 30 percent of the vote, lags respondents’ belief in India and especially China.
With competition from emerging markets set to increase, developed market exchanges face a challenge to their dominance. Almost four in ten (39percent) respondents believe New York will continue to play a global role for (IPOs) in 2025, and 27 percent believe that London will. Also, those incumbent exchanges that underestimate competition from emerging exchanges will lose market share as a consequence, according to three-quarters of respondents.
“Companies will have more and more options. A key learning that companies should always consider is that ‘one market does not fit all’. Once the decision to list has been made there are indeed a number of factors to consider in the choice of a listing venue.
“These include the stage in your company’s development, both in terms of business life cycle and corporate maturity, the fit between your desired investor base and the exchange, the benefits of being included in an index, the commitment to ongoing regulatory requirements, and many more,” PwC said.
The shifting patterns of domestic growth, consumer demand and investment flows mean that an increasing number of the companies with a global outlook looking to tap stock exchanges for capital will in future come from the emerging economies.
“On the other hand, stock exchanges from both the developed and emerging economies are already starting to look at the end game. Consolidation among Western exchanges continues to develop combined order books and a broader access to capital. And we are starting to see emerging market exchange groups build scale through joint initiatives and greater levels of integration,” the report stated.
Capital markets in 2025: The future of equity capital markets is a PwC report, written by the Economist Intelligence Unit (EIU). It examines the increasing competition from emerging market stock exchanges, the effect that is having on incumbent exchanges and the priorities and concerns for companies looking to list. It surveyed 387 executives at companies from around the world and across a range of sectors.
“IPO volumes demonstrate that emerging markets already account for an increasing share of primary market activity”, Matthew Westerman, Global Head of Equity Capital Markets (ECM) at Goldman Sachs said in the report.
“Given the level of economic growth in those markets and the equitisation (the process of companies raising equity on public markets, instead of relying on bank debt) still to occur, it is difficult to see what will change that trend,” he noted.
“Over the past 10 years there has been a significant increase in cross border capital market transactions, in particular IPOs. Indeed, the growth of the emerging economies has and will continue to have an impact on the global landscape of capital market transactions.
“Companies from all over the world looking to go public will have more choice than ever before. In the emerging countries, it is apparent that while development of deep domestic capital pools and appropriate local regulatory infrastructure will take time, in the short to medium term, firms will continue accessing capital abroad, predominantly in the three global financial centres of New York, London and Hong Kong. Asia is however expected to become an increasingly attractive source of capital for them, effectively challenging developed marketplaces,” said Clifford Tompsett, head of IPO centre, PwC.
“In addition, as the capital markets and stock exchanges in the developing economies become more sophisticated, companies from the West will be increasingly looking to these markets, with a view to tap into their growing wealth and the associated profile a listing may provide. Equally, the more traditional capital demand drivers, including private equity exits, deleveraging and spin offs by diversified multinationals will continue generating cross-border capital market opportunities,” Tompsett further said.
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