Initial Public Offering (IPO)

Why Ordinary and Less Economically Empowered People Should Prepare for Investment Opportunities and why it matters.

The history of public ownership dates back several centuries. One of the earliest examples was the Dutch East India Company (VOC), which issued shares to investors in 1602. It needed substantial capital for ships and international trade and therefore raised money from many investors rather than depending on a single wealthy owner. This helped establish the idea of dividing business ownership among the public. As public investment increased, organised markets developed for buying and selling shares. Amsterdam became an important early securities market, followed by major exchanges in London and New York.

During the Industrial Revolution, companies needed large amounts of capital for railways, factories, mining and manufacturing, making public offerings an important source of funding. In nineteenth and twentieth centuries, IPOs became a major feature of global financial markets. Companies used them to raise capital, expand operations and broaden ownership. Modern technology has made investing more accessible through stockbrokers, online platforms and investment funds.

Nigeria’s capital market developed to enable companies to raise funds from investors. The Lagos Stock Exchange was established in 1960 and later became the Nigerian Stock Exchange, now part of the Nigerian Exchange Group (NGX). Companies in banking, manufacturing, consumer goods and other sectors have used public offerings to raise capital and broaden ownership.

An Initial Public Offering (IPO) gives members of the public an opportunity to buy shares in a company when it first offers ownership to public investors. For many people, especially those who are not born into wealth, this can mean more than simply buying shares. It can be a chance to move, gradually, from being only a consumer to becoming a part-owner of a business. The growing interest in the Dangote Petroleum Refinery IPO makes this discussion particularly relevant. The refinery is one of Africa’s most significant industrial projects, and its planned public offering has generated attention because it could allow wider participation in a major Nigerian business. However, excitement must be balanced with knowledge. An IPO is an opportunity, not a guarantee of profit.

What an IPO Means

When a private company goes public, it offers shares to investors. Anyone who purchases those shares becomes a part-owner of the company. If the business performs well, shareholders may benefit through an increase in share value and, where declared, dividends. However, if the business performs poorly, investors can lose part or even much of their capital. Therefore, an IPO should never be treated as a lottery ticket. A famous company may still be a risky investment, and a good business may still be overpriced.

The Dangote Refinery as a case study

The proposed Dangote Petroleum Refinery IPO has attracted attention because of the strategic importance and scale of the refinery. It represents a broader question: should ordinary Nigerians only consume the products of successful companies, or should they also have opportunities to own part of those companies?

A trader, teacher, tailor, student or young professional may never have enough money to build a refinery. Yet the capital market can allow such individuals to own a small part of a large business. This is one of the most important roles of public capital markets: they connect businesses seeking capital with members of the public seeking opportunities to participate in economic growth.

Why Less Economically Empowered People Should Prepare for Investment

People with limited income often focus naturally on immediate needs such as food, rent, transportation, school fees and family responsibilities. For this reason, investing may seem like something reserved for wealthy people. However, whenever a person has a genuine financial surplus, learning to save and invest responsibly can be important.

The key idea is not that everyone should put all their money into IPOs. Rather, people should develop a culture of ownership. Instead of living permanently in the cycle of Work → Earn → Spend → Repeat, a person can gradually begin to acquire productive assets such as shares, businesses, Sukuk or Shariah-compliant funds.

Even small beginnings can matter. A modest investment may not transform a person’s life immediately, but regular saving, financial education and long-term discipline can create opportunities that would otherwise never exist. Knowledge often comes before capital.

The Good Side of IPO Investing

First, IPOs can provide access to large businesses that ordinary people could never establish on their own. Second, investors may benefit from long-term growth if the company succeeds. Third, companies may pay dividends, although dividends are never guaranteed. Finally, IPO participation can encourage long-term financial thinking.

For less economically empowered people, the greatest benefit may be psychological as well as financial: understanding that wealth creation is not only about earning income but also about gradually owning productive assets.

The Bad Side and the Risks

IPOs can also be dangerous when investors are driven by hype. A popular company does not automatically mean a profitable investment. Share prices can fall after listing, dividends may not be paid, and investors may lose money. People should never invest money meant for rent, food, school fees or emergencies.

Borrowing recklessly to buy shares is also risky. Before investing, a person should understand the company’s business, profitability, debt, risks, purpose of the funds and the reasonableness of the offer price.

Investors should also rely only on official information, the final prospectus and registered capital-market operators. Social-media rumours, WhatsApp investment groups and promises of guaranteed returns should be treated with extreme caution.

IPOs and Shariah Compliance

For Muslim investors, the question is not only, ‘Will I make money?’ It is also, ‘How is this money being made?’ Shariah-compliant investing generally considers both the nature of a company’s business and its financial structure.

The first consideration is the company’s core business. Activities such as conventional interest-based banking, alcohol, gambling, pork-related businesses and other prohibited activities are generally excluded from Shariah-compliant investment.

The second consideration is financial structure. A company may operate a permissible business but still raise Shariah concerns because of significant interest-bearing debt, interest income or other non-compliant financial activities. Different recognised Shariah screening methodologies use financial ratios and thresholds to assess these issues.

Process of Initial Public Offering ( Particularly for MSMEs)

• Establishing and Formalising the Business

The IPO journey begins with establishing a viable and sustainable business. The business must provide products or services that meet genuine market needs and have the potential for long-term growth. The business should be properly formalised through appropriate registration, licences, tax compliance, and corporate documentation. It is also important to separate the owner’s personal finances from the company’s finances. Mixing personal and business funds makes it difficult to determine the company’s actual financial position and can create serious problems during audits and due diligence.

• Building a Strong and Sustainable Business

Before considering an IPO, the business must demonstrate that it can survive, compete, and grow. Investors will be interested in the company’s revenue, profitability, market position, and future potential.

The company should focus on; Increasing and sustaining revenue, maintaining profitability. Controlling costs, building a strong customer base, developing a competitive advantage, expanding into new markets and creating scalable products or services.

A strong IPO candidate should have a convincing growth story. Investors must understand where the company is going, how it intends to grow, and how funds raised from an IPO will be used.

• Developing Proper Accounting and Financial Systems

One of the biggest challenges for many businesses is poor financial record-keeping. However, a company cannot successfully attract public investors without reliable financial information. The MSME should maintain proper records of its sales, expenses, assets, liabilities, inventory, debtors, creditors, and cash flows. It should also prepare regular financial statements, including the:

As the company grows, its financial statements should be independently audited. Proper internal controls, budgeting, bank reconciliations, approval procedures, and documentation are also necessary. Reliable financial reporting increases investor confidence and prepares the company for regulatory scrutiny.

• Establishing Corporate Governance and Professional Management

Many MSMEs are heavily dependent on their founders. The founder may make all major decisions and control daily operations. Although this may be suitable during the early stages of the business, it becomes a weakness as the company grows. An IPO-oriented MSME should gradually become an institution rather than a business dependent on one individual. This involves establishing:

A competent Board of Directors
Professional management
Clear organisational structures
Internal controls
Risk-management systems
Ethical and corporate policies

The company should also separate ownership from management where necessary. The founder may remain a shareholder or board member while qualified professionals manage daily operations. Investors are more likely to trust a company that can continue operating effectively beyond its founder.

• Financing Growth and Strengthening Capital Structure

An MSME’s financing journey often develops gradually. At the beginning, the business may rely on the founder’s personal savings. As it grows, it may use retained profits, bank loans, private investors, venture capital, or private equity.

The financing journey may therefore be: Founder Capital → Retained Earnings → Debt Financing → Private Investment → Private Equity/Venture Capital → IPO.

The IPO represents a later stage in the company’s development. It allows the business to raise funds from a wider pool of investors for expansion, new projects, technology, equipment, or working capital.

• IPO Readiness and Corporate Restructuring

Before beginning the IPO process, the company should conduct an IPO readiness assessment. This assessment examines whether the business is financially, operationally, legally, and managerially prepared to become a public company.

Important areas include:

Reliable and audited financial statements
Strong management
Effective corporate governance
Clear ownership structure
Tax compliance
Proper legal documentation
Sustainable business operations
A strong growth strategy

The company may need to undergo restructuring or corporate housekeeping. For example, it may need to resolve undocumented loans, clarify ownership, correct incomplete accounting records, settle legal issues, or transfer company assets that are wrongly held in the founder’s personal name.

• Appointing Professional Advisers and Conducting Due Diligence

The IPO process requires the assistance of professional advisers. Depending on the transaction, these may include: Investment banks or issuing houses, Lawyers, External auditors, Reporting accountants, Stockbrokers, Registrars, Tax advisers, Valuers and financial consultants.

These professionals assist the company in preparing for the public offering.

A major part of this process is due diligence, which involves a detailed examination of the company’s financial, legal, tax, and operational activities. The purpose is to identify risks and ensure that the information provided to investors is accurate and complete.

• Valuation, Prospectus and Regulatory Approval

The company must be valued to determine its estimated worth. Valuation may be based on methods such as earnings, discounted future cash flows, or comparisons with similar companies. The valuation helps determine: The number of shares to be offered, the price of the shares, and the amount of capital to be raised.

The company and its advisers then prepare the required offer document or prospectus. This document provides potential investors with information about the company’s business, management, financial position, risks, future plans, and the proposed use of IPO proceeds.

The company must also satisfy applicable regulatory and stock exchange requirements before its shares can be offered to the public.

• Marketing, Offering and Listing

After obtaining the necessary approvals, the company begins marketing the IPO to potential investors. This may involve investor presentations, meetings, roadshows, and public communication. The company must clearly explain why investors should invest. Its investment case may include:

Investors then subscribe to the offered shares. After the shares are allocated, the company may proceed to list on an appropriate securities market. At this point, the company moves from being privately owned to publicly accountable.

• Life After the IPO

An IPO is not the end of the journey. After becoming a public company, the business has greater responsibilities to shareholders, regulators, and the public.

The company must maintain:

Regular financial reporting
Audited financial statements
Corporate governance
Regulatory compliance
Transparency and disclosure
Effective communication with shareholders

Therefore, going public requires continuous accountability and discipline.

The Role of Proper Management and Strategic Scaling in MSMEs Business Growth

As MSME consulting firms focused on business development, we believe that small businesses should not see their current size as their permanent position. A small MSME that is properly managed, financially disciplined and strategically developed can grow into a larger company and, in the future, potentially become qualified to raise capital from the public through an Initial Public Offering (IPO).

Every large company was once smaller. The journey from a small enterprise to a publicly owned company may take years, but growth becomes more realistic when a business is properly managed and scaled.

For an MSME to reach this level, it must focus on proper financial and accounting records, good corporate governance, strong internal controls, sustainable profitability, effective business strategies, expansion into new markets, professional management and compliance with relevant laws and regulations.

Many MSMEs fail to grow not necessarily because their ideas are bad, but because they lack proper structures. A business that cannot clearly account for its income, expenses, assets and liabilities may find it difficult to attract serious investors. This is where MSME consulting firm and business development services like us (DWCIR), become important.

At DWC international resources, we help MSMEs move from simply surviving to becoming businesses capable of growing and attracting investment. Through proper business planning, financial management, governance and strategic scaling, a small business can gradually build the structure required for larger financing opportunities.

Conclusion and Recommendation

An IPO may not be the immediate goal of every MSME, and not every small business will eventually go public. However, MSMEs should understand that being small today does not mean remaining small forever.

The process basically involves: Start-up → Growth → Formalisation → Financial Discipline → Corporate Governance → IPO Readiness → Public Offering → Listing

“With proper management, transparency, profitability and strategic scaling, today’s small business can become tomorrow’s large corporation—and potentially, years from now, a company capable of offering ownership to the public through an IPO.”

This is why MSME development should not focus only on helping businesses access short-term funding. It should also focus on building businesses that are investment-ready, sustainable and scalable.

The bigger vision is simple:

Start small. Build properly. Manage efficiently. Scale sustainably. Create value. Then, when the business has grown sufficiently, explore larger sources of capital—including, potentially, an IPO.

This perspective gives MSME owners hope while also reminding them that growth requires preparation. An IPO is not where the journey begins; it is often the result of years of sound management, growth, accountability and value creation.

Ordinary and less economically empowered people should not blindly chase every IPO. Instead, they should prepare themselves to recognise genuine investment opportunities. Preparation is better than desperation; knowledge is better than hype; and long-term ownership is better than endlessly consuming without understanding how wealth is created.

The Dangote Refinery IPO is an important example of the larger conversation about public participation in economic growth. If major Nigerian businesses create wealth, ordinary citizens should have the knowledge and opportunity to participate responsibly. Yet every investment must be studied carefully.

The most important lesson is simple: do not wait until you become wealthy before learning how to invest. Learn first, save gradually, build financial discipline and invest only when an opportunity fits your financial capacity and values.

REFERENCES

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Poitras, G., & Geranio, M. (2016). Trading of shares in the Societates Publicanorum? Explorations in Economic History.

Securities and Exchange Commission Nigeria (SEC). (2023). Modes of public offering in the capital market. Securities and Exchange Commission, Nigeria.

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Securities and Exchange Commission Nigeria (SEC). (2020). Requirement for additional information on all prospectuses issued to the public. Securities and Exchange Commission, Nigeria.

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