What is the fate of GCC IPOs next year? Will we see the same momentum as in 2022?
Many questions arise about whether these IPO operations will continue with the same success as previous ones, considering further measures to raise interest rates and move investments to more profitable instruments in the US.
The Middle East and North Africa (MENA) region as a whole was buzzing with IPO activity this year, with some $21 billion raised from bids — the highest share since 2019 when Saudi Aramco went public in a $29 billion offering.
In parallel, the number of new companies based in the MENA region listed on the region’s stock exchanges has more than tripled.
The Middle East and North Africa IPO market, which saw nine companies raise $9 billion in proceeds from their share sales, continued its strong performance in the third quarter, with seven IPOs raising nearly $1.5 billion.
In contrast, a total of 992 IPOs were recorded globally as of the end of October this year, down 44 percent from the same period in 2021, according to Ernst & Young data.
Global investors appear to find the region increasingly attractive after Middle Eastern economies recovered quickly from the Covid-induced slowdown, and were supported by higher oil prices.
The region has become part of international indices such as MSCI and FTSE and thus attracts both regional and foreign participation from well-known funds.
Read related: Saudi to continue to experience IPO boom next year
Saudi Arabia and the UAE are the most active
Global Capital, one of the most important sources of information for international capital markets, says that “increased activity will continue in both Saudi and the UAE, who continue to build their economies and attract foreign investments.
According to the report, as world football matches end in Qatar, attention will shift away from the Middle East and return to normal.
“But for those interested in the financial markets, football celebrations were not the biggest and most important event in the Middle East and North Africa in 2022. At a time when IPO activity elsewhere in the world was declining due to worsening market performance, these (regional) deals were going from strength to strength.”
The report notes that money was flowing to Saudi and the UAE, especially after Russia’s withdrawal from MSCI’s global market indexes in March.
“High oil prices have been a contributing factor, of course, but Saudi Arabia and the UAE have recorded strong macroeconomic indicators and economic growth. Inflation is much lower than in the US and Europe. So, they have not faced the same challenges, and they are undertaking structural reforms to grow their economies, attract foreign capital and boost the flow of talent,” said the report, seen by Economy Middle East.
Saudi and the UAE have also taken substantial measures to facilitate IPO operations in their markets, in terms of facilitating business as well as performing IPOs.”
According to Bank of America, Saudi and the UAE have demonstrated that they have been able to cope with the fallout from Ukraine. “We expect the same issue in 2023, unless there is a fundamental shift in the macroeconomic climate of oil prices.”
Citigroup and Goldman Sachs Group expect IPOs to continue to flourish in the Gulf region in 2023.
Citigroup’s head of investment banking, Miguel Azevedo, predicted that the surge of activity will extend into 2023, with about 10 more companies to be listed.
“2023 should be at least as good as this year 2022,” he said in an interview with Bloomberg, adding that more family businesses, as well as tech-enabled companies, are likely to go public in 2023, which will mark the next stage after the past two years have seen a large influx of government-owned entities.
Reading the statements of many analysts, the strong trend of IPOs will continue next year, with a strong set of IPOs currently expected from the UAE and Saudi. They add that most GCC currencies are pegged to the dollar, which is an advantage for the region and its equities, as other emerging market currencies have been hit.
Earlier this month, Reuters quoted two sources familiar with the matter as saying Britain’s Barclays was looking to return to Saudi in a bid to secure a share of the kingdom’s booming capital markets.
The sources added that the British bank is looking at the possibility of obtaining a license in the Kingdom to be able to manage transactions, including initial public offerings.
Top IPOs
Here is a reminder of the most important IPOs recorded in Saudi and the UAE this year:
- Dubai Water and Electricity Authority (DEWA) has raised $6 billion from its public offering, making it the largest capital markets deal so far this year. DEWA’s listing is part of Dubai’s plans to list 10 state-owned entities to increase the size of the DFM to AED 3 trillion, as well as the establishment of an AED 2 billion Market Maker Fund to encourage the listing of more private companies from sectors such as energy, logistics, and retail.
- Americana, the largest quick-service restaurant operator in the Middle East and North Africa, is among the companies that went public this year. The company raised $1.8 billion from its initial public offering in November and dual listing on the Abu Dhabi and Saudi stock exchanges.
- Saudi Aramco Base Oil Company, known as Luberef, is the latest Saudi company to pursue a listing on Tadawul. It has raised more than $1.32 billion from its public offering.
- Bayanat, a provider of geospatial data products and services owned by Abu Dhabi-based artificial intelligence and cloud computing company G42, has raised more than AED 628.5 million from an IPO on the Abu Dhabi Securities Exchange (ADX).
- In October, Abu Dhabi-based healthcare holding company Burjeel listed its shares on the Abu Dhabi Stock Exchange after raising more than 1.1 billion dirhams from the sale of an 11 percent stake.
- Other companies listed this year include school operator Taaleem, Salik, TECOM, AD Ports Group, and Borouge.
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