Strong indications have emerged that the Nigerian capital market would soon witness a wave of initial public offerings (IPOs), following relative improvement in the prices of stocks in the Nigerian capital market.

IPOs are enabling either listed companies or unlisted companies to issue fresh shares the investing public to raise funds. Since 2008 when the financial crisis drove prices of shares to record lows, the market has been without IPOs. The only segment of the new issues market that has been active is rights issue and bonds market. Many companies have been reluctant to sell shares via IPOs for fear of under-pricing.

However, a top official of the Securities and Exchange Commission (SEC) told THISDAY that companies have started making enquiries preparatory to the floatation of IPOs.

“The level of the success rights issues have recorded in recent times and the improved prices of most of the shares at the secondary market, coupled with the increasing investors demand, have encouraged some of the companies, which are now preparing to make IPOs,” the source said.

The DG of SEC, Ms. Arunma Oteh, alluded to this development last week, when she said improvement in the level of investor confidence is beginning to attract issuers to the primary market.

According to her, the commission approved the floatation of eight equities and one supra-national bond worth N56.87 billion as at June; compared to three equities and one corporate bond of N4.49 billion in the corresponding half year of 2012.

The market has witnessed an unprecedented patronage recently with many of the local retail investors, who had taken flight on account of the drastic reduction in value of stockholding engendered by the season of decline, now returning to the market.

As at May 31, 2013, participation of domestic investors in the market stood at 51 per cent while that of foreign was 49 per cent. This showed an improvement on the previous 61 per cent to 39 per cent in favour of foreign investors in 2012.

Oteh has always reiterated the commission’s determination to strengthen its enforcement mechanism as way to restore investor confidence. One of those strategies to restore investor confidence is the introduction of a framework that would enable it address investors’ complaints within five days.

She had added that the revamping of the Nigerian Investor Protection Fund and the framework for the collective investor scheme would help to increase the confidence of more investors in the capital market.

Source: Thisday (by Goddy Egene)