Why OPay’s $19 New York IPO collapsed on its first day

VIA TRENDING EXPLAINED ON X:

Trending: The way Dangote sold shares in Nigeria for ₦525, Opay (a Chinese Co.) skipped its Nigerian market, and sold their own in America for $19 (₦25k), but nobody bought it. [Explained]

They planned to raise $304M by selling 16 million ADSs at $19 each. ADSs is what allow Americans to invest in foreign companies like OPay through US stock exchanges.

In comparison, Dangote’s IPO was sold ₦525 in Nigeria, Opay’s was sold ₦25,600 ($19) in the U.S. {$/1350}

So, for Americans to buy into OPay’s IPO, its shares had to be offered as American Depositary Shares (ADSs),

Which allows them to invest without needing a Nigerian brokerage account or going through the process of accessing the Nigerian stock market. You get? Because Opay is primarily a Nigerian company with Chinese owners.

While OPay had pegged its IPO price at $19, initially projecting as high as $21, yesterday, around 9:30 a.m., it was scheduled to begin trading on the NYSE 🇺🇸

However, by 2 p.m., indications for its ADRs (American Depositary Receipts) showed that investors valued it lower and were offering to buy the shares at $16.25–$16.75, not $19, indicating a potential immediate decline of 12–14%. By 2:30pm, 3pm, no sale, or perhaps even lower offers.

By 3:30 p.m., OPay withdrew and suspended the IPO indefinitely. No trading took place.

Which is highly unusual for an IPO not to trade on its scheduled first day. Last week, reports said Opay was targeting $336M IPO sales and had investors lined up to take $270M which could see it’s valuation hit $4.4 billion.

Analysts suggest the withdrawal may have been triggered by the unexpected low investor valuations, suggesting that the IPO was perhaps overpriced.

OPay, however, claims it was a “regulatory” issue that forced it to “pause” the IPO. Specifically, an outstanding regulatory inquiry in an undisclosed foreign jurisdiction. — It did not disclose what exactly.

Consequently, the IPO was not completed and its shares did and would not begin trading on the NYSE as scheduled.

IPO sales and Stock Trading are two different things. It’s what’s sold in the IPO that people can trade in the NYSE, i.e. 16 million shares. At that point Opay no longer controls the market price.

Dangote Refinery’s IPO was also fixed, at ₦525 (₦5,250). Although minority experts questioned the valuation, arguing that it was in fact, overpriced.

But Dangote’s target market was the average Nigerian, many of whom do not fully understand IPO pricing and valuation. Hence, the aggressive marketing, even at local markets and motor parks.

It’s acutely a similar situation with OPay. The only difference is that the majority of American investors are generally more financially literate and more likely to scrutinise the valuation. Respectfully, no shades.

Theories are now springing arguing that the recorded failure was because Opay is a Chinese company.

Others feel it was a pricing problem and they overreached instead of starting local where their market is. Interestingly, months ago, some Nigerian founders raised these concern and were dragged.

NYSE has also deleted the video of Opay officials ringing the bell at the NYSE yesterday morning, another chaotic indicator.

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