An Initial Public Offering is a tasking undertaking. It requires expertise in various fields. The reason for this is simple: “Allocate risk to those that are based placed to deal with it”. This is the case with the recent notification of the ZAFICO IPO proceeding as earlier indicated by the Minister of Finance, Dr. Bwalya Ngandu in his address to parliament in Q4 2019.
ZAFFICO becomes the first company in the tree processing industry to list on the LUSE. It is also the first listing on the LuSE since 2014. Their recently published prospectus to potential investors lists a number of affiliate companies that make up the “Dream Team” that has made this long-awaited IPO possible.
Sponsoring Broker and Transaction Advisor
The role of the sponsoring broker is very simple. They ensure that help and guide the company through the initial public offering process and also provide credibility for new investors considering the IPO investment. In addition, they hold the hand of the company going for the IPO and bring all the pieces of the transaction together.
For this IPO, Pangaea Securities Limited was selected as the sponsoring broker and transaction advisor as they have been one of the leading firm with this particular expertise in the Zambian Capital Markets. Pangaea is an extant player on the Zambia capital markets and has held the hand on a number of the companies that are currently listed on the LUSE.
Legal Advisor
The role of legal advisor is complex as they have the arduous task of ensuring that that all the legal requirements required to make the IPO possible are complied with.
For this transaction, Musa Dudhia & Co, who are among the top 3 leading law firms in Zambia with expertise in the legal framework of capital markets in Zambia.
The company is represented by legal counsel. Internally, the company legal department will work closely with the Legal Advisor in reviewing the company’s documents, records, and business to identify potential legal problems and make required disclosures on the prospectus.
Marketing Agent
The role of the Marketing Agent is to prop up the IPO and to ensure there is enough awareness regarding the listing. This may also include distribution of material related to the company by using all available channels for the dissemination of information that will be critical for a successful IPO.
For this transaction, KPR Consulting was handed the publicity task for the IPO.
External Auditors
The role of the company’s external auditors is historical in nature and is related to the auditing of financial statements. A company to be listed must have a minimum of three years audited financials. Mark Daniels Chartered Accountants are the external auditors for Zaffico.
In addition to the auditing of the financial statements, they are required to work closely with the reporting accountant and share any working documents that are requested.
Reporting Accountant
Audited financials are a must for any company seeking an IPO. LuSE rules further stipulate that a company’s audited financial statements and any forecasts must be review by an independent accounting firm. This firm is referred to as a reporting accountant. The financials and forecasts expose the performance of the company over a period of time. Astute investors use this information to ascertain whether investing in a company is worthwhile and whether or not that company has capabilities of creating value.
For this transaction, one of the big four, Deloitte Zambia, was chosen for the role of Reporting Accountant, to review the audited financial statements of the last three years.
Receiving Agent
The receiving agent receives and accepts from time to time within the offer period, from the trading participants and underwriters, applications to subscribe shares of stock and other required documents from stockbrokers, selling agents and underwriters based on their approved allocations and in accordance with the terms and provisions of the stock subscription agreement.
Due to the magnitude of this particular IPO, 4 local companies were chosen for this undertaking. Those companies are Pangaea Securities Limited, Stockbrokers Zambia Limited, Madison Asset Management Company Ltd, and Autus Securities Zambia Ltd.
Transfer Agent
A transfer agent is a financial services company whose primary function is to manage and keep track of registered shareholders for companies that issue stock. For this particular IPO, Corpserve Transfer Agents were hired as transfer agents to act on ZAFFICO’s behalf to manage their shareholder records and issue the new shares during the transaction.
Receiving Bank
For an IPO to successfully execute, financial institutions have to be involved to assist in the processing of payments and to hold the escrow account. Zambia National Commercial Bank were chosen as the participating clearing bank.
Funds held in the escrow account are only transferred to Zaffico when the IPO successfully closes and shares are transferred to each subscriber. If the IPO is oversubscribed, then the excess cash must be returned to those that were not allocated any shares.