With many tech startups across the globe proving to be massively successful, the decision-makers at the Nigerian Exchange Group (NXG) are looking for ways to encourage some of the most promising new companies to join their listings. What are the key factors behind this and what could it mean for investors?
How This Could Work
When 2021 ended, there were 35 startups across the planet, with each worth $10 billion or more. Leading the way was Bytedance, with the China-based artificial intelligence firm said to be worth $140 billion. Following them on the list are unicorns like SpaceX, Stripe, and Klarna.
These companies typically use the latest technology to exploit new markets or disrupt existing markets. However, the route for African tech startups to get listed has been difficult. This is where the NXG is looking to make a difference, by making it easier for these firms to go public and raise funds.
This could be done as a NASDAQ-type approach where tech companies with high potential could be listed. Olumide Bolumole is the division head of stock exchange listing activities at the NXG, and he said that the current requirement for startups to break even was hampering their growth. Instead, a new regulatory framework will be put in place, to help to ensure sustainable growth while protecting investors at the same time.
What Does This Mean for Investors?
It’s noticeable that none of the main tech startups are listed on the Nigerian stock exchange. As the fourth-biggest exchange of this type in the continent, it certainly offers the potential for allowing companies to attract new investors. For those investors, an emerging unicorn offers the potential for high returns.
This is just one of the ways of investing in the stock market and can be more volatile than other methods. An alternative involves index trading on large indices, such as the Dow Jones, NASDAQ, and FTSE. This is a popular type of investment that lets investors trade an entire market as they look to take advantage of global trends and world events that affect many companies or sectors.
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Who Are Some of the African Tech Unicorns?
A unicorn is a startup that has reached a valuation of $1 billion or more. Africa now has more of these firms than ever before, with five attaining this status in 2021. Interswitch and OPay both come from Nigeria, while Jumia Technologies is another good example of this sector. Advertised as Africa’s leading e-commerce platform, it’s present in 11 countries, including Nigeria.
Another name on the list is Chipper Cash. In this case, it’s a fintech startup that creates the software needed to allow instant money transfers from one person to another in different African or European countries. Chipper Cash recently revealed new brand ambassadors, including singer Spice Diana and comedian Anne Kansiime. In most cases, startups like these grow initially through venture capital funding. However, they may feel the need to issue a public offering to be able to fund their longer-term growth plans.
The chance to invest in tech startups could be good news for Nigerian investors, and could also help these firms to grow. However, it’s worth remembering that this is just one way of investing in the stock market to consider.
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