Raising capital on the NSX

Ogone Tlhage - Stock exchanges have generally been a useful vehicle through which firms may seek to raise capital where the need arises.

The Namibia Stock Exchange (NSX) has been a hive of activity recently and saw the listing of Nimbus Infrastructure, the first capital pool company, and that of Letshego Holdings Namibia, raising close to N$300 million in the span of a month alone.

At present, the NSX offers four different options for businesses looking to expand.

These range from an initial public offering (IPO) where a company issues a security for sale on the open market, and the option to list private placement where equity is sold directly to a select group of investors.

Further to that, for companies that would like to list on its main board at a yet to be determined date, the NSX provides the option to list on its Over-the-Counter (OTC) market. This is a stepping stone to companies that are not yet ready to make the big leap of faith.

IPO

“An IPO is the first time a particular issue of a security is made available for sale on the open market. After a company has gone public, it is regulated and must disclose quarterly and annual financial performance to the public,” says NSX CEO Tiaan Bazuin.

“When you list shares in a public offering, you are inviting shareholders to not only share in the ownership and profits of the business but you are also allowing them a vote on the future direction your company takes.

“Public offerings are more expensive for companies, so may cut into overall profit over time,” he explains.

Private placement

Another option is a private placement.

“The target investor audience for private placement deals are accredited investors such as investment banks, pensions, mutual funds and even some high-net-worth individuals may also purchase the shares through these options,” he says.

A private placement - or non-public offering - is where a business sells corporate bonds or shares to investors without offering them for sale on the open market, Bazuin explains.

“Private placement is less expensive than a public offering and is subject to less regulation,” he says.

According to Bazuin, both private placements and public offerings, such as IPOs, are ways to raise money to grow a business. It is a means for current shareholders to sell at a market predicted price.

“You may not earn as much money in a private placement compared with an IPO and the expenses associated with a private deal are less,” he says.

With the option of a private placement, firms have the advantage that access to capital is faster than what would usually be the case with an IPO.

“Private placements can also be completed quicker than IPOs, and if you value your position as a private entity, you do not have to sacrifice that privacy but can still gain access to liquidity, or cash, from the deal,” he says.

DevX

On the other side of the spectrum is the opportunity for firms to list on the Development Capital Board or the DevX, as it is commonly known.

“The Development Capital Board for listings of companies does not need to comply with some or all of the above criteria. The purpose of this sector is specifically to facilitate listings of new ventures and or businesses that do not have an adequate track record,” Bazuin says.

Companies that seek to list on the DevX should have fully researched projects and at least 10% of the capital raised must be provided by management, he explains.

OTC

Then there’s the Over-the Counter market - which when used - can provide a passage over time – onto the main board of the NSX.

“The OTC market of Namibia can be seen as a stepping stone for companies to come and list on the NSX Main Board. The biggest benefit it provides to the shareholders is a form of price discovery, while the company has to adhere to a lower level of disclosure and oversight than a listed entity,” Bazuin says.

Whether you are thinking of expanding your production line, or seeking new markets within the SADC region, the NSX may be the perfect vehicle to raise cash.