Flutterwave IPO hunt ignites review of listed African pioneers

In 2021, soon after Flutterwave raised $170 million, an excited Olugbenga Agboola, its founder and CEO, informed Reuters that the company “may consider the possibility of listing in New York or a possible dual listing in New York and Nigeria.” Since then, at nearly every step the company has been seen as a step closer to completing its initial public offering (IPO) ambition.

For many African founders, going public is the zenith of achievement in the startup journey. It is considered an even bigger milestone to list on any of the global stock exchanges, particularly the New York Stock Exchange (NYSE) or London Stock Exchange (LSE) outside Africa.

“A Flutterwave IPO, which will eventually happen, will make Olugbenga (GB) Agboola, the youngest African dollar ($) billionaire. The chap is not even 40 years old,” said Stephen K. Murithi, managing principal for Kenyan-based venture capital firm, Branhouse Capital.

An IPO is the first time a private company offers its stock to the public. Apart from possibly making Agboola an instant billion in dollars as Murithi projected, an IPO provides easier access to capital, which is essential for the growth and development of the company. An IPO also offers an opportunity for the company to improve its public image and branding; the ability to raise capital quickly by reaching a large number of investors, and the ability to use the raised capital to further the business, be it in the form of research, infrastructure, or expansion.

However, nearly all the technology companies either African-born or doing business in Africa that have summoned the courage to go public outside the continent have little success stories to show for it. The companies include IHS, CAB, Jumia, and Tingo.

Strive Masiyiwa, founder and chairman of Econet Group, highlighted this in a Facebook post.

Read also: Flutterwave moves forward with IPO plans for global expansion

“African companies that have listed on the big international markets like New York and London have been mauled. Two years ago, one of the biggest players in African telecoms, Airtel Africa, was listed in London. It is now worth less than half its value. Another big success story is a company called IHS listed on the New York Stock Exchange at $21/share. It is now (17 November) worth just $5.17/share. Then came another company called CAB, a payments company operating mostly in Nigeria, which was listed on the London Stock Exchange on 27 June at £3.35/ share. They ended last week at £.65/share,” Masiyiwa said.

A closer look at the pioneers

Airtel Africa is an outlier when compared with other companies, because the second largest telecom operator in Nigeria listed on the LSE at an initial public price of 80 pence in June 2019 with a market capitalisation of $3.9 billion. As of 23 November 2023, the company’s share price was $1.12 with a market capitalisation of $4.29 billion.

However, IHS Holdings was listed in October 2021 on the NYSE with 18 million shares offered at $21 per share at a $7 billion market capitalisation. The shares are currently worth $4.72 at a $1.58 billion market capitalisation, as of Thursday 23 November 2023. It has lost about 75 percent of the starting share value.

Crown Agents Bank (CAB) is a London-based payment processing and foreign exchange business, backed by private equity firm Helios Investment Partners, primarily in Africa, the Caribbean, and Southeast Asia, and acts as a commercial gateway for entities seeking to operate in these regions. The company listed on the LSE in July 2023 at a price of $4.28 per share at a market capitalisation of $1.06 billion. CAB’s share is currently priced at $0.80 at a market capitalisation of $202.6 million, data from Investing.com showed.

CAB Payments market cap decline is attributed to the volatility in the exchange rate system in Nigeria and other West African countries. According to the London Financial Times, CAB Payments, which specialises in foreign exchange and payment services for businesses that send money to emerging markets, slashed its revenue forecast for the year by 17 percent, blaming changes to market conditions in some of its key currency markets, including the Nigerian naira, for hitting margins and denting volumes.

“In recent weeks, the company has seen a number of changes to the market conditions in some of its key currency corridors, on top of the ongoing uncertainties surrounding the naira, which are impacting both volumes and margins, most notably the Central African franc and West African franc. At the present time, these market conditions are compressing margins and reducing trading volume; these challenges are recent but continuing,” CAP Payments said in a letter to investors.

Jumia, the e-commerce giant that is currently battling to stay afloat, listed on the NYSE on 12 April 2019 at an opening share price of $14.50, giving it a market capitalisation of $1.94 billion. Since 2019, Jumia Technologies AG’s market cap has decreased from $1.94 billion to $319.96 million, a decrease of 83.54 percent. That is a compound annual growth rate of -32.35 percent. As of November 24, the share price of Jumia was trading at $3.18.

“Stock exchanges are not there as a place for gambling as some ignorant people think, but for raising money for business ventures and to reward the general investor in the fruits of the success of their best entrepreneurs. Most of the well-established, so-called “big companies” are not doing all that well in terms of US$ value when you strip out currency depreciation, inflation, and foreign exchange challenges,” Masiyiwa said.

Flutterwave’s walk to IPO

Some experts who would want to remain anonymous say Flutterwave may be a success story from Africa as a publicly listed company, given the line of business it is currently leading on the continent. Flutterwave has so far processed over 550 million transactions worth over $32 billion and serves more than 2 million businesses. The company also boasts of international payment processing in 150 currencies and multiple payment modes including local and international cards, mobile wallets, and bank transfers. It has an infrastructure that reaches over 34 African countries, including Nigeria, Uganda, Kenya, and South Africa.

Given that digital payments are now woven into the transaction fabric of nearly all businesses, experts say Flutterwave is always going to make money and hence return on investment for investors looks secure.

However, Flutterwave would face its biggest test as an IPO company when it comes to corporate governance.

“The main issue is the corporate governance issue. It is done everywhere, people try to get their house in order because there are a lot of disclosures and this is not Nigeria. Investors want to see everything. I see good things for the company but for the individuals if they do not change, I see doom,” said a fintech stakeholder who would want to remain anonymous to speak freely.

Flutterwave has had a running battle with different allegations, all of which point to a challenge with corporate governance. Only recently the company was let off the hook in Kenya after a high court allowed the country’s Asset Recovery Agency, an agency that investigates and recovers proceeds of crime, to withdraw the second (and only remaining) case against the payments company.

In 2022, Flutterwave’s CEO was forced to write a letter to assuage employees over allegations of misconduct and investigation by the US Securities and Exchange Commission (SEC). In November 2023, Oneal Bhambani, the chief financial officer (CFO), announced his resignation, raising questions about its planned IPO.

“Losing CFO and finance executive in a short space whilst preparing for an IPO is not good news. Flutterwave was (is) the pride of Africa’s fintechs and startups. It would be unfortunate if Flutterwave failed to navigate from this rough patch,” said Mlungisi Dube, an internet hobbyist.

Read also: Flutterwave taps JPMorgan Chase executive on road to IPO

However, in an email response to BusinessDay, Flutterwave said Bhambani left to pursue new opportunities.

“We thank him for his many contributions to Flutterwave and wish him the best in his future endeavours. Israel Koledowo, head of finance for Africa, will lead the finance department on an interim basis as we embark on a global search for a new CFO. Israel has extensive experience leading finance departments at an international scale and will ensure a smooth transition as he has been leading the African continent finance team at Flutterwave for over 3 years,” Flutterwave said.

Corporate governance is partly responsible for the challenges IHS is facing with shareholders such as MTN. Experts note that an IPO status would mean that investors would demand more transparency from Flutterwave and may not be too forgiven for any infractions they identify.

“Some of the things that are allowed by Nigerian regulators would not be tolerated by the US SEC or foreign investors. Look at what they did to Binance,” said an expert.