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Aug 26, 2019

GCC IPOs see slight increase

Proceeds from IPOs in Q2 raise $866 mn

IPOs in the Gulf Cooperation Council (GCC) region increased slightly in the second quarter, with two companies listing on Saudi Arabia’s Tadawul, according to financial services firm PwC in its GCC Capital Markets Watch report.

The proceeds from the IPOs increased from $403 mn in the second quarter in 2018 to $866 mn in the second quarter this year. The increase in the total proceeds is mainly due to the sizable retail IPO of Arabian Centres Company, which generated  $659 mn – Saudi Arabia’s third-largest listing since National Commercial Bank raised $6 bn in 2014.

While IPO activity in the Gulf has been limited to Saudi Arabia so far this year, the United Arab Emirates (UAE) recently revealed the list of sectors and economic activities eligible for 100 percent foreign ownership, which may encourage market activity in the UAE in the near future, PwC says.

A number of GCC companies are actively preparing for IPOs, with one report estimating that more than $7 bn will be raised collectively. Tourism, retail, healthcare and education sectors are all well represented among the candidates.

In a recent press interview, the chief operating officer of the Dubai Financial Market also indicates that there is a healthy IPO pipeline and says he expects the market’s new real estate investment trust platform to have promising growth prospects.

Following Tadawul’s inclusion in the FTSE Russell Emerging Markets Index and MSCI Emerging Market Index, shares in Saudi Arabia have entered bull market territory, bringing a record inflow of funds, notes PwC. This inclusion should enable easier access to the local stock market – leading to increased participation by foreign investors, the report adds.

Activity on Tadawul is expected to improve as the exchange and Saudi Arabia’s Capital Market Authority have issued regulations for cross-listing, allowing companies from other Gulf countries to list on Tadawul.

Since last month there have been reports issued that indicate Aramco’s IPO is likely to take place in late 2020 or early 2021.

The listing of UAE-based Network International in April this year on the London Stock Exchange (LSE) is the largest outbound IPO to date from the Middle East and Africa region, on any international stock exchange. The IPO opened at a significant premium, valuing the business at more than $3 bn and making it the largest IPO on the LSE since June 2017. 

According to PwC, geopolitical issues, such as recent events in the Gulf of Oman, as well as Brexit uncertainties, will continue to impact the regional economy. But companies looking to tap into the equity capital market should begin to prepare for an IPO early in order to maximize their chances of a successful listing.