Iroko to List on London Stock Exchange AIM in 2022

IROKO's Potential Public Offering on the London Stock Exchange

IROKO, a media firm headquartered in Nigeria, is considering an initial public offering (IPO) within the coming 12 months. The anticipated venue for this listing is the Alternative Investment Market (AIM) of the London Stock Exchange (LSE).

Company Background and Early History

Established in 2011 by Jason Njoku and Bastian Gotter, IROKO has become a leading provider of Nollywood film content online, possessing the most extensive catalog available globally.

The company aims to secure between $20 million and $30 million through this offering, which would result in a valuation ranging from $80 million to $100 million.

Previous IPO Considerations and Recent Challenges

As early as October 2019, Njoku indicated the possibility of a public listing, considering both the LSE and local African exchanges. However, due to significant challenges faced by the company in the subsequent year, discussions surrounding the IPO were temporarily paused.

In 2020, IROKO initially planned to elevate its average revenue per user (ARPU) for its video-on-demand platform, iROKOtv, within Africa from $7-8 to $20-25. Initial progress was promising, but the onset of pandemic-related lockdowns led to a reduction in consumer spending.

This shift resulted in a 70% decrease in subscription numbers, prompting 28% of the company’s workforce to take unpaid leave. Conversely, international subscriptions experienced a 200% surge during the lockdown period, achieving an ARPU of $25-30.

Strategic Shifts and International Focus

Further difficulties arose in August when the CEO announced a reduction of 150 employees. This decision was attributed to the devaluation of the naira, increased regulatory pressure from Nigerian broadcasting authorities, and a downsizing of the outbound marketing team.

Consequently, IROKO halted its expansion efforts across the African continent, redirecting its focus towards international markets, specifically the U.S. and the U.K. A 150% price increase, from $25 to $60 annually, was successfully implemented in these regions.

Njoku stated that this strategic realignment significantly improved the company’s financial standing, resulting in its strongest cash position in years.

Financial Outlook and Valuation

IROKO’s expenditures on African growth were substantially reduced. The company prioritized markets where its economic model proved viable, with its international business demonstrating double-digit growth in 2020 and projections for continued expansion.

While not abandoning the African market entirely, IROKO is adopting a more cautious, “stealth mode” approach. Its established dominance in the African SVOD sector positions it favorably to capitalize on future improvements within the continent.

Currently, 80% of IROKO’s revenue originates outside of Africa, making a listing on a foreign exchange a logical step to consolidate its efforts. The LSE is considered a more suitable option than Nigerian exchanges, which have limited experience with early-stage tech company listings.

The company is targeting a market capitalization of approximately $100 million, making the AIM market of the LSE, designed for smaller companies, an appropriate platform.

Funding Strategy and Previous Acquisitions

Unlike many companies that seek to raise substantial capital during an IPO, IROKO intends to raise a similar amount to its last private funding round. The company secured around $30 million in its Series E round in January 2016.

Njoku explained that $10 million to $15 million would be allocated to corporate development, with the remainder distributed to existing shareholders. He emphasized that IROKO’s previous valuation never exceeded $70 million, meaning the proposed IPO range would not constitute a down round.

Furthermore, the sale of ROK Studios to Canal+ in July 2019 generated approximately $30 million, providing financial stability throughout 2020 and potentially beyond the IPO.

Comparison to Other Tech Companies and Future Plans

Interswitch, a Nigerian payments company valued at $1 billion, is also planning an IPO within the next two years. However, IROKO, having operated for only 10 years, is progressing towards a public offering at a faster pace than many of its peers.

Jumia, the only other internet company to go public in Nigeria, did so after seven years of operation. IROKO anticipates achieving this milestone in its eleventh year.

Njoku believes that IROKO’s success in the private sector can be replicated as a public company. He also expressed interest in offering IPO shares to loyal members, and plans to openly document the entire process to assist other African companies considering similar ventures.