When Ellah Lakes Plc announced that its ₦235 billion public offer had failed to meet the minimum subscription threshold, attention quickly shifted from the mechanics of the offer to a deeper concern: accumulated losses on the company’s books.
For critics, negative retained earnings and several years of reported losses raised red flags. For Chuka Mordi, the company’s Chief Executive Officer, those numbers tell a very different story in an interview with Arise Television.
In a detailed interview following the close of the offer, Mordi argued that what many describe as “losses” were in fact the natural accounting consequence of building an oil palm business from the ground up — a sector where capital is deployed years before revenue materialises. According to him, the numbers must be understood in the context of a biological asset cycle, not a conventional trading business.
The Oil Palm Gestation Cycle: Why the Early Years Show Losses
Mordi’s central explanation turns on the agricultural fundamentals of oil palm cultivation. Oil palm trees do not begin to yield commercially viable output immediately; from seedling to harvestable fresh fruit bunches takes approximately four years. That biological timetable imposes a structural delay between capital deployment and revenue generation.
Ellah Lakes commenced planting in 2021 after executing a reverse takeover into the formerly insolvent Ellah Lakes Plc shell, which had been distressed at the end of 2019. In practical terms, the early years were defined by expenditure without corresponding income. Extensive land clearing and preparation had to be undertaken before seedlings could be cultivated. Fertiliser programmes, irrigation systems and supporting infrastructure required systematic investment. Each of these elements demanded sustained capital outlay long before a single litre of crude palm oil could be produced and sold.
As Mordi explained to shareholders at the company’s first annual general meeting, profits were never expected in the initial four-year cycle. Dividends, he made clear, would not materialise during the establishment phase. In oil palm agriculture, the gestation period is inherently long and capital intensive; value creation is back-loaded.
From an accounting perspective, this investment phase necessarily manifests as operating losses and negative retained earnings. The financial statements reflect the timing mismatch between capital expenditure and cash inflows, rather than any structural flaw in the underlying business model.
From Bare Land to Revenue Generation
The CEO also pushed back against the notion that Ellah Lakes is merely carrying paper valuations on its balance sheet.
When the company reversed into the listed shell, it brought in land assets in Edo State. From that starting point, it has:
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Secured approximately 2,400 hectares in Edo State
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Added roughly 5,000 hectares in Ondo State
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Completed a deal in Enugu State
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Built a crude palm oil processing mill
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Developed nurseries with tens of thousands of seedlings
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Planted thousands of hectares now yielding fresh fruit bunches
Over time, these biological assets have matured. In 2025, Ellah Lakes began producing crude palm oil (CPO) after completing its mill installation the previous year.
That shift, Mordi said, marks the transition from pure investment phase to revenue generation. The company’s latest results, he noted, show that it has now become cash-flow positive.
This transition is central to his argument: the historical losses reflect the cost of planting and infrastructure, while the present marks the beginning of monetisation.
Revaluation Surplus and Asset Backing
Another issue raised during the interview was the size of the company’s revaluation surplus, which constitutes a significant portion of total equity.
Mordi clarified that these revaluations are not arbitrary “paper gains,” but the result of audited asset assessments. When bare land is converted into planted estates with biological assets and a functioning processing mill, its economic value changes.
Under applicable accounting standards, those assets must be revalued and reflected accordingly.
Importantly, he stressed that revaluation surplus is not cash available for dividend distribution. It is simply the audited representation of assets built over time — land, plantations and processing infrastructure.
Why the ₦235 Billion Public Offer Fell Short
Beyond the accounting debate, Mordi acknowledged that the public offer did not meet its minimum 50% subscription threshold.
He attributed this primarily to an overestimation of the size and depth of Nigeria’s retail investor base. The offer, he explained, was structured as a long-term capital raise designed to provide an equity buffer covering capital expenditure and operating expenses for the next two years.
Had the company sought a smaller amount, he suggested, it may have cleared the threshold.
He was emphatic, however, that the failed offer is not a strategic setback. Refunds to subscribers have already been processed, and the company intends to pursue alternative financing structures, including instruments it has used in the past such as convertible debt and structured financing.
The ARPN Acquisition: Scale and Revenue Accretion
A significant portion of the capital raise was tied to the proposed acquisition of Agro-Allied Resources & Processing Nigeria Limited (ARPN), valued at approximately ₦155 billion.
According to Mordi, the acquisition would:
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Add approximately 22,000 hectares of land
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Include 11,000 hectares of revenue-generating trees
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Increase Ellah Lakes’ market position to third-largest in its segment
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Deliver immediate revenue accretion
He described the transaction as transformational, arguing that it would multiply revenue significantly and accelerate the company’s move from build-out to scaled operations.
Dividend Track Record and Institutional Investors
One key constraint on institutional participation, particularly from pension funds, is the requirement for a demonstrated dividend history.
Mordi said the company expects to establish a dividend track record within the next 12 months as cash flow improves. Once dividends are declared consistently, institutional participation in future capital raises could broaden.
He acknowledged that such statements create expectations — and insisted that management is prepared to be held accountable for them.
The Medium-Term Outlook
Perhaps the most revealing remark in the interview was Mordi’s shift in language. Three years ago, he spoke of long-term potential. Today, he speaks of medium-term growth, reflecting what he believes is a shortened runway to profitability.
Agriculture, he reiterated, is a long-cycle sector. Value is created progressively as capital investments mature into measurable performance outcomes. The losses of the early years, he insists, were the price of building the platform.
Mordi conceded that as the company has scaled, the need for structured investor relations has grown.
Ellah Lakes has now retained a professional investor relations firm to improve transparency and engagement with shareholders and potential investors.
Accounting Explanations Versus Capital Markets Reality
Mordi is correct that biological assets appreciate as they mature and that revaluation surplus reflects audited asset growth rather than distributable cash. When bare land becomes a planted, yielding estate supported by processing infrastructure, its balance sheet value logically increases.
However, investors are rarely reassured by accounting explanations alone. Markets focus on cash flow durability and earnings visibility. They ask not only whether losses were necessary, but whether the company has now reached the inflection point where those losses convert into sustainable profitability. In Ellah Lakes’ case, the historical losses might be explainable. The question is whether they are conclusively behind the company. This distinction matters. Accounting narratives explain the past; capital markets discount the future.
The Dividend Commitment
The CEO’s forward-looking statement that Ellah Lakes expects to establish a dividend track record within the next twelve months introduces a sharper test. Institutional investors, particularly pension funds, often require evidence of consistent dividend payments before allocating capital. Mordi’s acknowledgement of that constraint is candid.
Yet the promise also raises expectations. Declaring dividends in the context of recent accumulated losses requires confidence not just in near-term cash flow, but in its sustainability. A premature dividend could appear cosmetic; a delayed one could reinforce scepticism.
This is where the market’s patience may be conditional rather than assured. Execution will determine whether optimism hardens into confidence or dissolves into doubt.
The Size of the Ask
Another source of lingering scepticism lies not in the losses themselves, but in the scale of the capital raise. The ₦235 billion public offer was ambitious relative to the company’s revenue base and operational maturity.
Mordi has suggested that Ellah Lakes may have overestimated the depth of the retail market and that a lower threshold might have seen the offer succeed. That explanation contains truth. Nigeria’s retail equity participation remains shallow compared to more developed markets.
But a raise of that magnitude typically depends on institutional anchors. It requires not just belief in long-term agricultural cycles, but clarity around near- to medium-term earnings trajectories. The market’s reluctance may therefore reflect caution about timing and valuation rather than rejection of the business model. In that sense, the failed offer was less a referendum on oil palm plantation economics and more a signal about capital market readiness.
Agriculture Versus the Stock Exchange
Private equity investors frequently back agricultural projects with long gestation periods. They understand that land and biological assets mature slowly. Public markets, however, operate differently. Listed companies are evaluated continuously, and capital is repriced daily.
This difference in tempo matters. What may be entirely rational within a long-term agricultural investment framework can appear premature in a listed equity context. Ellah Lakes’ story may ultimately prove sound. If cash flow stabilises, if the proposed acquisition delivers revenue accretion and if dividends materialise within the timeframe indicated, the earlier scepticism will look cautious rather than prescient.
But until those milestones are demonstrably achieved, the market is likely to withhold full endorsement.
A Question of Inflection
At its core, the debate is not about whether oil palm takes time. It unquestionably does. The debate is about whether Ellah Lakes has crossed the threshold from build-out to durable profitability.
Mordi’s argument is that the company has reached that inflection point — that the investment years are behind it and that revenue generation has begun to validate the strategy.
The market’s response suggests that investors are waiting for clearer proof. In capital markets, explanation earns attention. Execution earns trust. For Ellah Lakes, the coming twelve to eighteen months will determine whether scepticism gradually recedes or becomes entrenched.
