New Listing Opportunities for SMEs, Start-ups in the Stock Exchange

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Nigerian capital market authorities have created a new platform for listing of newly established companies and small and medium enterprises (SMEs). The new window allows SMEs and new companies, otherwise known as start-ups, to list their shares and raise capital through the  stock market.

SMEs and start-ups account for more than 90 per cent of businesses in Nigeria and provide about 85 per cent of employment, according to various national and international data.

The framework for the operation of the new listing platform at the Nigerian Stock Exchange (NSE), to be known as growth board, was approved by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC).

The growth board will be the fourth board at the NSE. There are three existing listing boards at the Exchange, including premium board-for large-cap companies that meet additional requirements on dedicated corporate governance assessment, main board- the general board for all companies that meet the specific stringent listing rules and alternative securities market (ASeM), which provides listing for quotable companies that cannot meet or sustain listing requirements for the main board.

The framework, obtained at the weekend by The Nation, creates two segments on the growth board for start-ups, micro and small companies and medium-sized companies. Start-ups and small companies are denoted by market capitalisation of between N50million and N500million while medium-sized enterprises are companies with market capitalisation of between N500million and N4billion.

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Start-up and small companies are expected to be listed on the first segment, known as entry segment, while medium-sized companies will be listed on the second segment, known as standard segment.

For any company to be listed on the growth board, it must be a duly incorporated public limited liability company with at least two years of operations, audited financial statements in line with the International Financial Reporting Standards (IFRS) and must have grown its revenue by a minimum of 20 per cent cumulatively in its last two years of operations.

Also, all companies to be listed on the growth board must undertake that their promoters or directors shall retain a minimum of 50 per cent of their shares for a minimum period of 12 months from date of their listing, and that the directors or promoters shall not directly or indirectly sell or offer to sell such securities during that 12-month period.

The framework meanwhile provides alternative requirements for listing for each segment. Under the entry segment, a new business may be considered for listing if it can provide evidence of investment in it by a core investor or a strong technical partner that has a minimum of two years’ operating track record, or a majority shareholder, who is either a High Net Worth Individual (HNI) or is a director of a listed company. Under Nigerian rules, HNI is an individual with net worth of more than N100 million.

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Besides, companies heading for the entry segment must have market capitalisation of not less than N50 million, a minimum of 10 per cent of its shares available or to be available to minority retail investors and at least 25 shareholders.

Under the standard segment, a new business may be considered for listing if it can provide evidence of a core investor or a strong technical partner who has a minimum of four years operating track record, or a majority shareholder who is a HNI. The company must also have a minimum market capitalisation of N500million, at least 15 per cent of its shares must be held or will be held by minority retail shareholders and it must have a minimum of 51 shareholders.

The NSE stated that it aims to use the growth board for greater global visibility for eligible Nigerian entities and foreign companies in order to engender global capital flows.

The new board is designed to support SMEs’ growth as part of the strategic initiatives by the stock market to enhance its traditional roles as catalyst for economic growth and development

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