On Saturday, February 22, Flutterwave executives, led by CEO Olugbenga Agboola, visited President Bola Ahmed Tinubu and reportedly discussed the possibility of taking the company public on the Nigerian Exchange Limited (NGX).

“We’ve seen banks raise hundreds of billions in the past year, so it makes sense for Flutterwave to be looking at Nigeria. It’s not out of the ordinary at all,” Gbenga Magbagbeola, Managing Director of Sycamore Investment and Asset Management Ltd (SIML), tells Techpoint Africa.

Flutterwave’s management has not provided any further detail, adding to the ongoing speculation about a potential IPO for the country’s highest-rated fintech company. This also marks the second time the idea of a local listing has been raised with the first coming during an event organised by Chapel Hill Denham and the NGX, where Agboola was notably cautious when asked by Temi Popoola, CEO of the NGX, about the company’s preferred listing destination.

But as speculations swirl, the question remains, “What are the favourable exit stragies for Flutterwave?”

Where are the exits? 

In African startup and venture capital circles, discussions around exits are becoming more common as investors push for returns on their investments.

The question of “where are the exits?” has gained prominence in recent years, particularly as many investors are eager for high-profile exits that can validate the continent’s growing startup ecosystem.

One of the most frequently cited exits is Paystack’s 2020 sale to Stripe. While the exit has been described as a watershed moment in African tech, many investors point out that Paystack’s sale is still the first example referenced when talking about exits.

The concern is not about the size of the deal but about the lack of other notable exits to help build investor confidence in the region.

This makes Flutterwave’s IPO all the more critical. While Agboola has downplayed an imminent IPO, stating that profitability remains the company’s primary goal, many see the company’s public listing as crucial in providing the liquidity and returns that investors are increasingly demanding.

 Is a local listing feasible? 

While Magbagbeola points to the recent recapitalisation efforts by Nigerian banks as evidence that there is sufficient liquidity for a listing of Flutterwave’s size, Praise Ihansekein, Head of Investment Research at Meristem Nigeria is less optimistic about the NGX’s liquidity noting that some sectors provide more liquidity than others.

“There are over 150 stocks listed on NGX but the portion of the stocks that trade daily is probably around 20% and most of them are concentrated in the banking sector,” she says.

Nigeria’s stock market is largely dominated by traditional companies in the banking, energy, and fast-moving consumer goods sectors. Magbagbeola argues that the market is now ready for a new generation of companies and investors.

While older Nigerians may be sceptical of investing in the stock market due to the aftermath of the 2008 crash, younger Nigerians are increasingly turning to foreign stocks through wealth management startups like Risevest and Bamboo.

Magbagbeola suggests that tech stocks on the NGX could be the key to attracting younger investors.

“I think there’s a level of excitement that a successful technology firm will introduce to the market that will unlock some more liquidity,” he says.

As fintechs like OPay, Flutterwave, and Moniepoint continue to grow in mainstream adoption, they could be the catalyst that encourages young Nigerians to invest in the exchange.

Despite the potential, a major concern for investors would be the market’s performance post-IPO.  

“What you want to look at if you’re Flutterwave and listing in Nigeria is whether the level of secondary trading on the stock exchange supports your valuation. Some companies are already starting to delist because they feel that the market is not pricing the company correctly, and that would be one area that a company like Flutterwave would look at,” Magbagbeola notes.

For Ihansekein, a successful local listing for Flutterwave is indeed possible. However, like Magbagbeola, she emphasises that the real test will come after the IPO is completed.

“An IPO is likely to be successful for a startup like Flutterwave, but what would sustain them is the performance of the company. So you cannot just plan based on the initial reactions,” she explains.

What challenges could Flutterwave face?  

Even if the NGX is ready, Flutterwave still has hurdles to clear before going public. Chief among them is regulation. The company has faced its share of legal and compliance challenges, primarily in Kenya.

Flutterwave may have taken steps to address these concerns, such as hiring former American Express executive Oneal Bhambani as CFO in 2022. However, Bhambani’s brief tenure — leaving after 18 months — raised doubts over the company’s affairs.

Fortunately, much of those issues appear to be in the past, with Kenya’s Asset Recovery Agency withdrawing the last of the cases against the company in November 2023. Agboola has also repeatedly brought up its numerous licences as evidence of a willingness to comply with regulators.

Magbagbeola suggests that Flutterwave’s recent discussions with the Nigerian president signal a willingness to work closely with regulators, which could ease any regulatory concerns if the company decides to pursue a local listing.

“For me, I believe that the visit to Aso Rock is one step in that direction to try and temper any aggressive bearing from the regulators even as they try to comply. It’s always in the best interest of any organisation to be on the right side of regulation,” he notes.

Beyond regulation, valuation is another major factor. Flutterwave was last valued at $3 billion when it raised a Series D round, although it’s unclear whether that valuation still holds. Public markets, however, often place less emphasis on investor hype and focus more on a company’s financial performance.

The key question that would impact its performance would be whether it is profitable or at least close to it.

“In Nigeria, profitability is quite important,” Ihansekein notes. “Some of the companies that recorded losses last year were strong companies in terms of their valuations and cash flows, but because they recorded losses, investors were selling off.”

 Exploring a dual listing 

Where a local IPO alone doesn’t serve its goals, Flutterwave could explore a dual listing going public on both the NGX and an international exchange like the NASDAQ. This approach has been used by companies such as Seplat and Oando.

A dual listing could offer several benefits. First, it might help Flutterwave secure a stronger valuation. The Nasdaq is home to many of the world’s biggest tech companies and could provide a more favourable benchmark for pricing its shares. That, in turn, could influence how the company is valued on the NGX.

“That helps Flutterwave with the issue of being undervalued in the Nigerian market because if it is pegged in the US, investors would more likely reference the US market in order to determine the Nigerian price,” Magbagbeola says.

Second, listing in multiple markets could give investors more confidence. Local investors would get the opportunity to own shares in a homegrown fintech success story, while global investors would see it as part of a larger, more sophisticated market.

But a dual listing also comes with challenges. It adds complexity in terms of regulatory compliance and financial reporting, and it could stretch the company’s resources thin.

 Lessons from Jumia  

If Flutterwave is serious about going public, it only needs to look at Jumia as a cautionary tale. In 2019, Jumia became the first African tech company to list on the New York Stock Exchange, and the excitement was palpable.

After an initial surge, its stock price plummeted as business performance dipped. The primary lesson here is that a strong brand and investor enthusiasm only go so far in public markets, with financial performance the ultimate test of value.

But unlike Jumia which operates in a notoriously tricky market, Flutterwave plays in a more stable sector — payments — serving large clients such as Uber.

If it can show strong financials and steady growth, it may avoid the mistakes that turned Jumia’s IPO into a disappointment.