Andy Egwim warns that Dangote Refinery's ₦525 share price doesn't mean it's cheap. The implied market cap is ₦65 trillion ($49 billion). A low per-share price just means the asset is sliced into more pieces, not that the company is undervalued.
So Dangote Refinery is coming to the market at ₦525 per share, and apparently you only need to buy 10 shares to get in. So with about ₦5,250, roughly about £3 or so. So if you've got like £5, you can get in. In fact, this £5 note could actually get into Dangote Refinery IPO. So is Dangote Refinery cheap? I have absolutely no idea from the numbers, and neither do you. I will explain to you. It's not just about the raw numbers. Because one of the biggest mistakes people make when investing is confusing a low share price with a cheap company. Let me show you. Now imagine I have this big cake, you know, big piece of cake, or, you know, it's £100 and I cut it into 10 pieces. So each piece is £10. If you give me £10, I'll give you a piece of the cake. 10 pieces. Now I take exactly the same cake, about the same size, and cut it into 100 pieces. Each piece is only now £1. Did the cake suddenly become cheaper? Nope. Still a £100 cake. I just made the pieces smaller. So shares in a company work much the same way. So when I look at Dangote Refinery, ₦525 isn't actually the number I'm most interested in. I'm interested in ₦525 multiplied by all the shares in the company, and that gives you an implied value of roughly ₦65 trillion. That's about $49 billion. Now we're asking the right question. Not, can I afford ₦525, but is this business worth ₦65 trillion? Because affordable does not necessarily mean cheap when it comes to investing, and making that mistake could mislead you in your investment decisions.
