Nigeria’s IROKO Partners Limited media company is working on plans to list on the London Stock Exchange (LSE) Alternative Investment Market.
Reports indicate that the Initial Public Offering (IPO) could be effected in the next 12 months. The company had earlier on announced plans to go public either on the London Stock Exchange or a local bourse on the continent but sought an international presence as this may enable further growth of the industry and the company itself.
About Nigeria’s IROKO Partners
The company was founded in 2011 by Jason Njoku and Bastian Gotter and boasts the largest online catalog of Nollywood film content globally.
The media company, according to reports, will raise between $20 million and $30 million, valuing the company at $80 million to $100 million.
While making the announcement in October 2019, the company’s CEO Mr Njoku, however, did not reveal the exact time this was going to happen, and remained mum on the whole process in 2020.
The company in 2020 had plans to increase its average revenue per user (ARPU) in Africa for its video-on-demand service, iROKOtv, from $7-8 to $20-25.
This was, however, not achieved amid Covid-19 pandemic-induced lockdown fears.
Consumer discretionary spending reduced in Nigeria and other African markets leading to a 70% drop in subscription numbers, and in May, 28% of the company’s staff went on unpaid leave.
But unlike the numbers iROKOtv local markets put up, its international subscribers grew 200% during the lockdown, hitting a $25-30 ARPU range.
However, more bad news came in August when the CEO announced that the company was laying off 150 people.
While making the decision, Njoku cited the naira devaluation, regulatory onslaught by the country’s broadcast regulator and a reduced outbound marketing team as reasons behind the lay off.
With the company spending $300,000 or more every month on growth, it decided to halt any scaling efforts on the continent.
IROKO instead focused on its international market, primarily the U.S. and the U.K., where it has been able to execute a 150% price increase from $25 per year to $60 per year.
Njoku said this decision set the company straight, leaving it in a stronger cash position than it had been for years.
Speaking to TechCrunch, he said the costs of pursuing Africa growth is what was really resized dramatically, citing that they were so focused on defending Africa and basically ended up doing nothing.
“We pulled back to focus on where our economics actually makes sense. Our international business organically grew double-digit in 2020 and we expect it to continue this way for the foreseeable future,” he said.
Understanding Africa’s Entertainment Industry
PriceWaterhouse Coopers published a report in 2018, indicating that Nigeria’s entertainment industry stood at a whopping $4.4 billion. Much of this is partially due to its music stars whom have gained international recognition. Some of these include Davido, Burnaboy and of course the brother duo group P-Square.
Nollywood itself stands second in terms of output, after South Africa’s film industry, which garnered $9 billion in 2018. East Africa alone yielded about $2.4 billion collectively. Given that mobile telephony is growing day by day on the continent, the ability for individuals to access content remains massive.
With South Africa and Nigeria leading the scene, industry experts such as PWC indicate that the industry could very well surpass $10 billion by 2023, enabling growth for a significantly larger number of other entities to enter the market. For sure a number of American companies are already looking to establish a strong presence in Nigeria, Kenya, South Africa and not to forget Tanzania. (The latter alone is another phenomenon as Bongowood, or rather Tanzania’s Hollywood is reeling to burst onto the global scene).
IROKO’s plans for Africa
IROKO isn’t entirely giving up on the African market, instead, think of it in stealth mode. Due to its dominance over the past eight years as one of the strongest independent SVOD companies in Africa, it is hard not to see the company in pole position to benefit from any improvements made on the continent.
That said, IROKO makes 80% of its revenue outside Africa and listing on a foreign exchange will help consolidate its efforts.
For Njoku, the Nigerian Stock Exchange or other local exchanges do not have a history of listing early-stage tech companies; therefore, the London Stock Exchange makes more sense in the short term.
IROKO is also seeking a market cap of about $100 million, which is small for the primary market.
This is why the media company is choosing to list on the Alternative Investment Market (AIM) of the LSE.
A sub-market of the LSE, the AIM is built specifically for small-cap companies. Still, there are plans in the future for IROKO to progress to the main market as its valuation grows — something U.K. sports betting company GVC and online fashion retailer ASOS have done in the past.
Most companies when going public tend to raise more money than their private equity days.
But it’s quite different with IROKO. The company, which secured around $30 million in total with its last priced round (Series E) in January 2016, plans to raise less or a similar amount when going public in 2022.
When IROKO sold ROK Studios to Vivendi-owned Canal+ in July 2019, the terms of the deal remained undisclosed.
But from the CEO’s statement, an estimate of the acquisition could be around $30 million. What’s particularly impressive is that the proceeds from the deal likely sustained the company through a rough patch in 2020 and might well do so after its IPO in 2022.
Joining IROKO in plans to go public within the next two years is Interswitch, a Nigerian-based payments company valued at $1 billion.
But unlike Interswitch, which was founded in 2002, IROKO has been operating for just 10 years.
Within that time, the only internet company to have gone public is Jumia, and it did so after seven years.
IROKO is expected to achieve this feat in its eleventh year of operation and Njoku, who holds an 18% stake in the company, believes it’s enough time to take the next step.