The local bourse’s last Initial Public Offer (IPO), where shares are offered to the public before listing, was in 2017, although the Exchange has made various efforts to groom, develop and handhold various SMEs towards a listing.
Established in 1998, Flo-tek has grown from a small family-run business into a nationwide household name in the provision of pipes, tanks and associated materials. The company has operations in South Africa, Angola, Namibia, and Zambia, and has become the largest plastic pipe manufacturer in Southern Africa.
The listing project leader, Arun Iyer, told BusinessWeek that processes were ongoing to prepare the company for a listing in the next two years. He said Flo-tek would create stock options for its employees in order to bring them into the ownership value chain of the company ahead of listing.
“We have held meetings and committed that we will get the listing done,” he said in an interview. “We had thought about a Johannesburg Stock Exchange listing at first, but a lot of people said ‘you are borne and bred here and you must list the company here’.
A public listing on the BSE brings with it additional capital for companies via the sale of shares. However, the BSE’s listing rules also mean companies generally have to undergo transitions to adhere to the stringent legal and corporate requirements of the Exchange.
Besides the costs of the transition, many SMEs have shied away from listing due to the loss of control they have to accommodate in bringing new shareholders into their entities. Many SMEs founded by families have preferred to remain private even as they grow, to avoid ceding control to new shareholders.
Iyer said it took several years to convince the family around Flo-tek to agree to a listing.
“It took us a long time and we had to convince the uncles about this being the right way to go,” he said. “It took about six to seven years to convince them that we had to go down that route and convince them why other people should have a say in how we run our business. “We are finally ready.”
Iyer said he hoped the listing process would be a broad-based affair in terms of the investors who come on board Flo-tek.
“I don’t just want the pension funds to be involved in the business. “I would want it to be broad-based and as we go in the journey, it must be about broad-based development and how equity builds wealth. “We want to be an example so that other SMEs can see that it can be done,” he said.
For the BSE, Flotek’s upcoming listing will crown efforts made over the years to foster more local primary listings.
