The recently announced 2024 Botswana Stock Exchange IPO promises to be “delicate” and “complex”. TEN critical issues for the appointed advisors to address follow:-
- The BSE is overcapitalised. Will the BSE declare a dividend to extract its excess cash reserves before selling to the general public, or will the BSE include the cash pile in the IPO pricing and then declare a bumper dividend to the new shareholders after the IPO (to stimulate retail investor participation)?
- Will Advisors declare a single IPO objective? It’s either to enrich the existing selling shareholders (a capital raise will likely not be on the table) or empower stakeholders/new shareholders. It can’t be both.
- How will the BSE regulate itself: during the IPO process and thereafter? The Botswana Stock Exchange censured Botswana Telecoms for inappropriate investor relations communications practices during its IPO. Who will censure the BSE for malfeasance?
- Where is the growth story in the Botswana market? The BSE has been in a bear market for 13 years, and trading volumes have been trending down. The companies listed on the BSE have, in the aggregate, reported broadly flat earnings averaging – US$335m annually since 2015, which is lower than the US$430m average achieved in 2010-14.
- The BSE’s market capitalisation is expected to be slightly larger than the Nairobi Stock Exchange at USD13m (see attached assumptions). The Nairobi Stock Exchange trades at a discount to its book value. How will the BSE avoid trading at a discount to its Book Value as an illiquid share?
- Will the Advisors’ Valuation and IPO Pricing Report be published in full in the prospectus for the market to appraise? The valuation should be made public, comprise a relative and intrinsic valuation, and address that the Botswana Stock Exchange does not pay tax as a defacto monopoly.
- Will the Botswana Stock Exchange prominently disclose any special exemptions of disclosures from its own listing rules in the prospectus?
- Will the Botswana Stock Exchange appoint advisors who are both Lead Advisors AND Selling Agents to the offer? Many recent failed African IPOs were characterised by underwriting being displaced by higher-risk equity sales commission structures.
- Will the Botswana Stock Exchange publish and promote an IPO Disclosure Policy to the general public to avoid the disastrous corporate communications seen in the Botswana Telecoms IPO?
- Given its profile, will the Botswana Stock Exchange adopt progressive investor relations and sustainability communications practices (including transcripts and “push” communications)?
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