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My New Year Wish List: Dreaming of the Big Board

This week on Street Talking in NEXT, I argue for the listing of successful private companies on the Nigerian Stock Exchange.

Alright, so today’s title should have been ‘My Christmas wish list’. In fact, I got bitten by this wishful thinking bug only a few days to Christmas. On December 20, 2009, Binos Yaroe, general manager, Market Operations & IT at the Nigerian Stock Exchange, announced that its governing Council had approved the change in name of its junior board from Emerging Markets to Alternative Investment Market & Private Placements. The move, he explained, was to ‘provide incentives and waivers’ to more companies to list on the NSE. That was the fire for my wire. The only snag is that now that the festive season is over, wish lists have been put on freeze. Well, sort of. But mine is a different kind of dream gift basket. The presents are not really for me in the selfish sense of sole ownership or benefits. On the contrary, granting my wish would profit the genie as much as the kettle rubber.

So what would I like for 2010? Here goes. I would like to see more iconic companies listed on the NSE. Zinox, Tastee Fried Chicken, Chisco Transport, Chivita, Gala, Sahara Energy, Ekene dili Chukwu Transport, Ibeto Group, Mr. Biggs, Arik Air, Adamac, Yale Foods makers of the popular Digestive biscuits, Okin Biscuits, Sokoa Chair Center, Computer Warehouse Group, HiTV, Silverbird Entertainment, GeePee Industries, OK Plast, Ruff & Tumble, Mo’Hits, Tinapa, St. Nicholas Hospital, Kennis Music, Orange Drugs, Emzor Pharmaceuticals, Glo, MRS, Suburban Telecoms and the list goes on. Each of these companies represents a resounding success story and stimulating inspiration.

Let me be the first to confess that the list is not exclusive or definitive. It is not meant to be. I realize that I have omitted many worthy organizations that are regional champions or specialist providers. No problem. Feel free to add new companies to the list.

However, my hope for their going public has nothing to do with socialist inclinations of wealth distribution, which seems to colour most vexed discussions on the listing of successful private companies, notably the telecoms giants. Rather than argue for the investor-side benefits, which are obvious and numerous, I want to hold brief for the securities issuer-side gains of public listings.

I strongly believe that a public listing, inefficient as markets may occasionally be, provides the best mirror on the value of a company. For institutions which have been built to enviable heights by a visionary individual or daring band of entrepreneurs, a public quotation allows owners, who want to leave the business or monetize a part of their holdings, to do so with minimal qualms. Of course, sometimes, a late founder’s family may have other interests and prefer to exit the company’s administration. Markets provide a seamless transition switch for these changes in ownership. In addition, as founders age and retire, employees who were content with salaries and perks, however fat, may bristle at the ‘unfairness’ of absentee managers getting all the fruits of their labour, without any upside for those laboring at the salt mines. A public listing permits staff members to buy into the success of their employers and ties manager and owner interests much closer. The same logic of inclusion applies to foreign majority-owned companies. Furthermore, the imprimatur of approval that institutional ownership brings cannot be matched by any single founder, however maverick or renowned. Finally, public ownership signifies that owners are thinking of business continuity after their tenure. Legendary business leaders like Rupert Murdoch, Warren Buffett and Li Cheung know this too well.

The gains do not stop there. Markets allow these companies to tap long-term capital for growth and investment. Even cash-rich and profitable companies need permanent capital. Perhaps, the best demonstration of this was provided by Steven Schwarzman’s hugely successful Blackstone Group, the private equity, advisory and alternative investments giant, which cited the need for permanent capital as its primary reason for listing on the New York Stock Exchange in 2007. KKR, its arch-rival, has since announced plans to go public as soon as market conditions improve.

During the pre-crash boom, many private and family-run companies in developed economies, which traditionally sought exchange listings as their liquidity door, were attracted to private equity buyers because of their distaste for the excessive regulation of public markets.

In this season of hysteric corporate lynchings, the NSE should show its sincerity to boosting listings by ensuring that companies are not burdened by politically attractive but economically disastrous regulations, which do little to raise their attractiveness to investors or lower their cost of capital. The only thing worse than regulation-lite is regulation overdose. Or overkill.

Maybe it’s the audacity of hope but if only these companies knew all the benefits of listing then my wish may well become their command. Happy New Year!

The original article may be read here on the NEXT website.

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