OPay has moved a step closer to becoming a publicly traded company, filing a preliminary prospectus for a planned initial public offering (IPO) in the United States. The document sets out the fintech firm's plan to raise capital, the details surrounding the investment opportunity, and the potential risks that prospective investors should keep in mind.

On Friday, OPay submitted its registration statement to the U.S. Securities and Exchange Commission (SEC) — the first formal step in a U.S. listing, in which a company lays out its business, finances and risk factors for regulatory review — signalling its intention to list its American depositary shares on the New York Stock Exchange (NYSE) under the ticker symbol OPAY. The registration statement is available on the SEC's EDGAR database.

The prospectus is still in its early stages. As such, it does not yet provide specific details such as the number of shares being offered, the anticipated price range, or the expected net proceeds from the IPO. The listing will also ultimately require final approval from the NYSE, along with the completion of the necessary regulatory procedures.

Planned use of proceeds

OPay said it intends to use the funds from the offering for a variety of business purposes. The company aims to invest in new technology, enhance its distribution methods, and develop additional products and services. It is also looking to expand into new markets and may set aside part of the proceeds for potential acquisitions or strategic investments.

Management emphasised that it will remain flexible in how it allocates the funds, allowing the company to adapt to a changing business landscape and to evolving plans.

Stanbic Africa Holdings to buy up to $200 million in shares

The prospectus also highlights a specific agreement with Stanbic Africa Holdings Limited, a subsidiary of South Africa's Standard Bank Group. Under the arrangement, Stanbic has pledged to purchase OPay ordinary shares through a private placement that will take place alongside the IPO. Such pre-listing commitments effectively give an offering a committed institutional buyer before the final terms are known.

The investment, however, is not set in stone. It is capped at $200 million and depends on certain conditions, including Standard Bank Group's regulatory capital limits and a stipulation that the stake cannot exceed 4.99% of OPay's shares once the transaction is completed. While Stanbic Africa Holdings is committed to the investment, the final amount may vary based on the specific terms of the agreement.

Stanbic will additionally face restrictions on transferring the shares it acquires for 12 months following the purchase, although there are some exceptions to this rule. The restriction works much like the lock-up periods commonly attached to newly listed shares, limiting how soon the stake can change hands after the listing.

ADS structure and holding-company risks

The fintech company is preparing to offer American Depositary Shares (ADSs) representing shares in the company, with Citibank serving as the depositary. ADSs negotiable certificates issued by a depositary bank that represent shares in a company incorporated outside the United States, allowing those shares to trade on a U.S. exchange. OPay is headquartered in Singapore but incorporated in the Cayman Islands. When investors buy the ADSs, they will technically own securities in OPay Limited itself rather than in its operating subsidiaries directly — a distinction the prospectus notes may affect their investment experience.

The filing also flags a number of points tied to this structure. OPay does not foresee paying dividends to shareholders in the near future, and any future dividends would depend on the company's decisions and the specific conditions related to the ADSs.

The prospectus further points to several challenges, including competition, cybersecurity and technology risks, fluctuating regulations, and potential financial losses from changes in foreign exchange rates and interest rates. The company also acknowledges the difficulties it may face when expanding into new markets where it has less experience.

Investors should keep in mind that they are investing in a foreign holding company whose performance hinges on its various subsidiaries and contractual agreements. These factors could ultimately affect OPay's financial performance and the value of the shares.

Details still pending

For now, the prospectus serves as a preliminary outline of the upcoming listing, with many essential details still to come. The final offer price, the number of ADSs available, and the expected proceeds will be revealed as the IPO process progresses, typically through amendments to the registration statement filed with the SEC. Until then, the document should be regarded as an initial overview rather than a finalised offering for sale.