Oga Seun owns a shawarma stand in Yaba, Lagos.
Six years ago, it was a plastic table, a small grill, and a queue of maybe ten people on a good night. Now there are two branches, a delivery service with three dispatch riders, and staff who keep increasing in number.
Oga Seun is one ambitious guy. He wants ten branches across Lagos, then Ibadan, then Abuja. The shawarma is great too — a 4.5 rating on all delivery apps, and Nigerians in the diaspora are always raving online about how much they miss it.
What he doesn’t have is the money.
To raise the money he needs to grow, he has three real options: borrow from family (his uncle owns a massive farm somewhere in Osun State), find one wealthy backer willing to fund the whole expansion in exchange for part ownership of the business, or sell tiny slices of ownership to people he has never met —a woman in Enugu, a man in Kano, a Nigerian living in Toronto who wants somewhere to put his savings —in exchange for their money.
Now, scale that last option up to the size of a real company. Add lawyers, regulators, and a stock exchange, and what you’ve got is roughly what an IPO—an initial public offering—actually is.
An Initial Public Offering (IPO) is the process by which a private company sells shares to the public for the first time and lists them on a stock exchange, so that from that point onwards, anyone with a brokerage account can own a piece of the company.
The primary reason companies do this is money – for expansion, debt repayment, new equipment, or financial backing for whatever comes next. An IPO lets a business raise a large amount of capital from a very large pool of investors, all at once, in exchange for giving them a stake in the business.
The Step-by-Step Play of an IPO
Oga Seun cannot just start selling shares like that. No real company can. There’s a fairly regulated process most IPOs go through, whether the business is based in Silicon Valley or Lagos.
It starts with underwriting. A company hires an investment bank, such as Stanbic IBTC Capital or Chapel Hill Denham, to manage the sale. The bank agrees to buy the shares first, at an agreed price, and then resell to investors. If the demand falls short, then the underwriter is stuck holding what didn’t sell, not the company.
This risk is exactly why underwriters charge a fee, usually a percentage of everything raised, and why they’re selective about which companies they put their name behind.
Next comes the paperwork. The company files a registration statement with its market regulator. In Nigeria, this is the Securities and Exchange Commission (SEC). In this statement, they declare their intention to sell shares. The SEC assesses the company to gauge their worthiness, and out of this process comes a document that lays out what the business actually does, how it makes money, who runs it, the risks attached to it, and exactly how many shares are being offered (the prospectus). This must be published by the company when it’s time to raise public funds.
The prospectus is the one document worth reading properly before you ever buy in, and most people never do.
PS. This is obviously an oversimplification of what a real prospectus contains. To see one, check out MTN Nigeria’s actual public offer documentation on the SEC’s website.
With the prospectus in hand, the company and its bankers go on a roadshow, pitching to big institutional investors over a week or two. Those investors respond with indications of interest—how many shares they’d want and roughly what they’d pay — a process called book-building. It’s how underwriters measure real demand before anyone’s money actually changes hands.
Somewhere in that range of prices, the actual stock price gets fixed, usually a few days before trading opens. Get it right, and the company raises what it needs without leaving money on the table. Get it wrong, and the results are public — and a little embarrassing.
For example, when Uber priced its IPO in May 2019, bankers had floated valuations as high as $120 billion. By the time Uber was ready to set a price, Lyft, its main competitor, had gone public a few weeks earlier, and its stock price fell once trading started, which scared investors in the ride-hailing industry.
So instead of pricing at the top of its range, Uber settled at $45 a share, the bottom of what had been proposed, and raised $8.1 billion from the IPO. Then the stock underperformed once trading in the secondary market opened, closing day one at $41.57, roughly 8% below the IPO price, and by some measures, the largest first-day dollar loss in US IPO history at the time.
Not every IPO goes the way the roadshow promised.
Once the price is set, the underwriters decide on the allocation: who actually gets shares, and how many. Big institutions typically get the lion’s share and retail investors get whatever’s left, unless a company deliberately sets aside more, the way SpaceX did in its record-breaking June 2026 listing. They initially reserved around 30% for individual investors, and later trimmed this figure to about 20% as more demand came in — still well above the low single-digit allocations retail investors usually get.
After allocation, shares land in investors’ accounts — a CSCS account, if you’re buying through the Nigerian Exchange (NGX) — and trading opens on the exchange. From the first bell, the price stops being the company’s decision and becomes whatever buyers and sellers agree it’s worth.
Not every company follows this exact script, either. Spotify skipped underwriters entirely for its 2018 listing, choosing a direct listing instead: no roadshow, book-building, or bank buying shares upfront. The NYSE simply set a reference price of $132 based on private trading history and let the market find its own opening price on day one, opening at $165.90 and closing at $149.01.
Direct listings save on underwriting fees, but there’s no bank standing by to steady a rocky debut, and they don’t raise fresh capital either, since existing shareholders sell stock they already hold, not the company selling new shares.
MTN Nigeria’s history adds its own wrinkle, closer to home. When MTN Nigeria joined the NGX in 2019, it didn’t sell new shares to the public — it was part of a settlement following a regulatory fine, so the shares simply started trading with no public offer attached. This is called a listing by introduction.
The actual chance for retail investors to buy in came two years later, in 2021, when MTN sold some of the shares it owned in a ₦97 billion public offer priced at ₦169 a share. It was oversubscribed by close to 40%, so the final allotment — and the amount actually raised — ended up being higher than the original target. Two different transactions, both loosely remembered today as “the MTN IPO.”
When Everyone Wants In: Oversubscription
Sometimes the book-building process becomes a problem underwriters are happy to have: too much demand. If investors collectively demand more shares than a company is selling, the offer is oversubscribed. It happens more often than people assume (re: the MTN case above), especially with a company that already has brand equity or a household name attached.
SpaceX’s June 2026 listing is a good recent example. The company, ending more than two decades as a private business, was targeting around $75 billion from the offering. Its order book reportedly pulled in something closer to $150 billion in demand — roughly double what was on offer.
Shares were priced at $135 and closed their first trading day at $160.95, up 19%, and retail demand held up too, which was fantastic!
When an offer is oversubscribed, what happens in practice is that not everyone gets what they applied for. The company and its underwriters ration the available shares, sometimes proportionally, sometimes by ballot, and refund the difference. If you’ve ever applied for a hot public offer on the NGX and gotten a message saying you’d been allotted fewer units than you paid for, with the balance refunded to your account, that’s oversubscription.
Why Some Companies Would Rather Not
Going public can look like a clear win from the outside: a cash backup, a listed stock, and a bit of prestige. But it isn’t free, and plenty of companies avoid it for as long as they possibly can.
The most immediate reason is scrutiny. A public company has to publish its financials every quarter, disclose material risks to competitors and regulators alike, and answer to a board that ultimately answers to shareholders whose priorities may not match those of the founders.
SpaceX’s own president, Gwynne Shotwell, made a similar point once the company finally listed. She’d resisted going public for years, and said plainly that she didn’t want the business fixated on quarterly numbers: “I do not want to focus on quarterly earnings,” adding that what SpaceX does is, in her words, “very futuristic.” This kind of patience gets harder to defend once announcing quarterly earnings becomes part of the routine.
Then there’s the price of raising the money in the first place. Underwriters take a cut of whatever’s raised, on top of legal, accounting, and listing costs that can run into the millions before a single share trades. None of that compliance spending stops once the IPO is done, either.
Pricing remains a genuine gamble too, no matter how many bankers are involved. Uber’s stock opened underwater and stayed there for months. A listing can pop 19% on debut, the way SpaceX’s did, or it can do the opposite. Either way, a company’s first real impression on the public market is largely out of its own hands.
Some businesses split the difference: staying private and raising money through venture capital or private equity instead, negotiating terms with a handful of sophisticated investors rather than disclosing everything to the whole world (in our case, this could mean asking Oga Seun’s uncle or other wealthy individuals for the money). Others, like Spotify, go public without the traditional machinery at all. There’s no one-size-fits-all and the companies that wait the longest aren’t necessarily getting it wrong.
Back To The Shawarma Stand
Oga Seun probably isn’t filing a prospectus anytime soon, and most businesses his size never will. But the next time a company you actually recognise — an MTN, a Dangote, whichever Nigerian business finally gets its turn — starts the process, you’ll know roughly what’s happening behind the scenes: bankers testing appetite, a document worth reading before you commit your money, a price argued the night before, and a first trading day that tells you, in real time, what strangers collectively think the business is worth.
Whether this process makes it worth owning a piece of a business through an IPO is a question only you can answer against your own goals and how much risk you can take.
Any public offering, local or international, carries real risk. If you’re curious about putting money to work beyond a regular savings plan, Investify lets you start exploring investment opportunities on Piggyvest, at a pace that makes sense for you.
