• Direct listings continued their momentum with seven listings across several MENA countries
  • Bahrain, Kuwait and Egypt all launch new ESG reporting regulations

Dubai: According to the EY MENA IPO Eye Q3 2021 report, the MENA region saw four IPOs raise total proceeds of US$1.836b during Q3 2021 – a 1,483% increase in value on the same quarter in 2020.

The number of IPOs increased from one in Q3 2020, representing a 300% surge. The year-to-date total number of IPOs stands at eight in the MENA region so far this year, with a combined value of US$2.261b. Direct listings continued their momentum with seven such listings occurring during Q3 2021.

The four IPOs in Q3 2021 were Al Yah Satellite Communications Company (Yahsat), Tanmiah Food Company (Tanmiah), Mataam Bayt AlShatira Lilwajbat Alsariya Company (Burgerizzr) and Arabian Internet and Communications Services Company (Solutions by stc). The Yahsat listing is the first IPO to occur on the Abu Dhabi Securities Exchange (ADX) since 2017, raising US$730.6m by offering 40% of its shares. The offering was oversubscribed multiple times, with Mubadala continuing to retain a circa 60% shareholding in the company.

Equity markets have also had an exceptional year so far, with the ADX continuing to be the top performer with a YTD return of 52.6%. Saudi Arabia’s Tadawul is the second-best performing MENA market with a YTD return of 32.3%.

Widespread regulatory changes

The third quarter of 2021 saw a series of notable regulatory changes with Qatar amending its Commercial Companies Law, while the ADX and Dubai Financial Market (DFM) extended their trading hours and waived the minimum commission fee on trades for all listed securities. The Capital Market Authority of Saudi Arabia approved three IPOs and one direct listing on the Nomu–Parallel Market. In addition, three IPOs on the main market received approvals.

Matthew Benson, EY MENA Strategy and Transactions Leader, says

“During Q3 2021, the number of IPOs increased 300% as compared to Q3 2020, when there was only one IPO on the MENA markets, with proceeds increasing 1,483% compared to Q3 2020. This brings the total number of IPOs YTD in 2021 to eight, with total proceeds of US$2.3 billion. As MENA economies rebound from the pandemic and oil prices remain favorable, companies with strong fundamentals continue to receive ample investor interest and the pipeline of IPO candidates is ever increasing. At EY, we continue to work closely with MENA companies to support them on this transformational journey to go public, which starts many months and often years ahead of their IPO journey.”

Saudi Arabia Lists 3 IPOs in Q3

During Q3 2021, Saudi Arabia once again led activity in the IPO market within the region. In August 2021, Tanmiah listed on the Tadawul, raising US$107.2m by offering 30% of its shares. Burgerizzr also concluded its IPO on the Nomu–Parallel Market and raised US$31.8m. Solutions by stc, a unit of the Saudi Telecoms Company, raised US$966.4m in its IPO on the Tadawul.

UAE: ADX Lists its first IPO in four years

The ADX officially ended its four-year IPO drought with the listing of Yahsat in Q3 2021, followed by the listing of ADNOC Drilling and Fertiglobe during Q4 2021. Other listings in the pipeline include Emirates Global Aluminium and Abu Dhabi Ports.

Oman: Signs of recovery

According to the IMF, Oman’s economy is set to recover in 2021, with non-hydrocarbon GDP growth of 1.5% as the vaccine rollout gradually restores domestic activity, alongside the recovery of external demand. Oil production in Oman is projected to increase after the current OPEC+ agreement expires in April 2022, while inflation in Oman has been subdued.

Egypt: Exchange paves way for SPACs

The Egyptian Exchange (EGX) proposed changes to the EGX listing and delisting rules of the EGX, paving the way for SPACs to list. The proposed amendments include a new article that will allow listings of companies with the purpose of acquisition, provided that the capital increases are invested in savings vessels with a fixed return and set away for the recipients of subscriptions until acquisition.

In addition, new regulations for the EGX30 Index came into force in August 2021, mandating that a maximum of five companies operating in each sector can be included in the index. The EGX expects these changes to improve diversity across the index, making it more attractive to investors.

The changes that Egypt’s Financial Regulatory Authority (FRA) have introduced will also reduce the amount of capital that companies need to offer to the public, from 25% of overall shares to just 1% of those in the EGX’s total free-float market capitalization. And from 2022, EGX listed companies and unlisted non-banking financial services will be mandated to produce ESG reports that include ESG metrics within their annual financial statements.

Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, says:

“The MENA IPO market activity has picked up in Q3 2021 with four listings raising a total of US$1.8 billion in proceeds. KSA and Abu Dhabi are leading the IPO activity and continue to have a strong pipeline for the coming quarters, while activity in Dubai continues to lag. We have also seen the re-emergence of larger IPOs, which have been met with solid investor interest, further demonstrating the ample liquidity that is currently available in the market. Around the world, however, we are seeing IPOs being pulled or delayed in multiple markets due to the large number of offerings looking for investment, so we need to remain vigilant in this region as the pipeline grows.”

ESG mandates may block access

Notably, the ESG context is rapidly evolving globally across the MENA region – and MENA policy is broadly keeping pace with investor sentiment. Institutional investors are raising the stakes when it comes to assessing company performance using ESG factors. Right across the region, Q3 saw a flurry of announcements relating to new ESG mandates.

In the UAE, the Securities and Commodities Authority (SCA) has made it mandatory for listed companies to publish an annual sustainability report. Several MENA stock exchanges such as the Abu Dhabi Stock Exchange, Dubai Financial Market, Boursa Kuwait and the Bahrain Bourse have issued their own ESG reporting guidelines and many MENA exchanges have launched awareness campaigns for their listed companies on the importance of ESG. The latest announcement on ESG is from the Saudi Exchange, which published its disclosure guidelines to help further advance ESG disclosures in the Saudi capital markets.

As MENA companies look to raise capital in the public markets, the lack of a strong sustainability strategy and ESG disclosure can create a value gap. After going public, companies continue to face scrutiny on their ESG disclosures from third-party ratings and rankings agencies. Hence, a lack of focus on ESG disclosures may create a gap in meeting stakeholder demands and expectations.

For IPO candidates, ESG forms an integral part of their equity story, and a clear strategy can help to attract a larger pool of investors as part of the IPO process and have an impact on the company’s valuation. The ESG agenda is becoming ever more important for investors and regulators alike and companies in the region should ensure they are not lagging.

-Ends-

EY | Building a better working world

EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets.

Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.

Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today.

EY refers to the global organization and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit ey.com.

The MENA practice of EY has been operating in the region since 1923. For over 97 years, we have grown to over 7,500 people united across 21 offices and 16 countries, sharing the same values and an unwavering commitment to quality. As an organization, we continue to develop outstanding leaders who deliver exceptional services to our clients and who contribute to our communities. We are proud of our accomplishments over the years, reaffirming our position as the largest and most established professional services organization in the region.

Send us your press releases to pressrelease.zawya@refinitiv.com

© Press Release 2021

Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.

The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.

To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.