Nigeria’s IROKO plans to go public on the London Stock Exchange AIM in 2022

In October 2019, Njoku hinted that the company was going public either on the London Stock Exchange or a local exchange on the continent. However, the CEO kept mute about the whole process the following year due to how tumultuous it was for the company.

In 2020, the company 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. Through the first four months of the year, it seemed IROKO was set to achieve that. But amid pandemic-induced lockdown fears, consumer discretionary spending reduced in Nigeria and other African markets. What followed was 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. Njoku cited the naira devaluation, regulatory onslaught by the country’s broadcast regulator, and a reduced outbound marketing team as reasons behind this decision.

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 to this decision set the company straight leaving it in a stronger cash position than it had been for years.

“The costs of pursuing Africa growth is what was really resized dramatically. We were so focused on defending Africa and basically ended up doing nothing. Zero marketing or anything to drive that,” he told TechCrunch. “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.”

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 builtspecifically 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. In what seems like a down round, I asked Njoku why the company isn’t planning to raise more?

“We don’t need more. To be honest, $10 million to $15 million will be for corporate development; the rest will be secondaries for shareholders. As a private company, IROKO’s valuation was never priced above $70 million so anything in our target range wouldn’t be a down round at all,” he said. “Especially if you consider in that time we exited ROK for close to the total amount of capital we raised for IROKO; we have returned $11 million to early investors and shareholders already. We still have material capital left from the ROK-Canal+ acquisition coming in every 6 months until 2023.”

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 11th year of operation and Njoku, who holds an 18% stake in the company, believes it’s enough time to take the next step.

“What we can achieve in private, we can equally achieve as a public company. We will likely open up the IPO to our loyal members too so they can capture the value too, which I am super excited about. One thing about IROKO is that we have always been pioneers and we’re okay being super experimental. I plan to open-source the entire process so any other African company coming behind — if we’re successful — will benefit from our experience,” he said of the journey ahead.