MENA sees 48% drop in IPO proceeds in H1: EY

Four initial public offerings in the Middle East and North Africa region raised a total of $425.8 million in the first half of 2021, a 48 per cent drop in proceeds compared with the same 2020 period. The number of listings was the same year-on-year.

According to the EY Mena IPO Eye Q2 2021 report, after an uptick in Q4 of last year, 2021 began with a slow start with three IPOs getting listed in Q1. In the second quarter, only one IPO was issued. Taaleem Management Services, which was listed on the Egyptian Exchange, raised $131 million.

The report noted that globally, traditional IPO performance has remained strong after riding a wave from Q1 2021, with 597 IPOs raising total proceeds of $111.6 billion. “This was 206 per cent and 166 per cent higher than Q2 2020 in deal numbers and proceeds respectively and was the most active second quarter by deal numbers and proceeds in the last 20 years. The previous record was set in Q2 2007, when 522 IPOs raised $87.6 billion.”

Matthew Benson, EY Mena strategy and transactions leader, said the region’s IPO market did not witness a pick-up in activity during Q2 with only one IPO listed on the EGX while direct listings continued their momentum with six listings across several Mena countries. “Compared to H1 2020, though the number of IPOs remained at four in H1 2021, the total proceeds raised decreased by 48 per cent. Preparations are ongoing for several key transactions expected in the second half of this year, in particular with the UAE and Saudi Arabia demonstrating a strong pipeline of IPO candidates.”

He said the outlook on the region’s IPO activity remained positive, taking into account the continued improvement in economic conditions and stability in the region, coupled with the strong performance of oil prices seen so far in 2021.

In the UAE, the Abu Dhabi Securities Exchange (ADX) is currently gearing up for several rumoured IPOs. The Abu Dhabi National Oil Company (Adnoc) and OCI are considering the listing of their joint venture, Fertiglobe. Adnoc, for its part, has also announced the sale of a minority stake in its drilling unit in an IPO valued at $10 billion.

Mubadala Investment Company-owned satellite operator Al Yah Satellite Communications completed its IPO on the ADX in Q3 2021 and raised $731 million.

In Dubai, the capital markets witnessed another setback when the anticipated IPO of Tristar Transport, a logistics company, was cancelled after it had started its public share sale in early April. The company was planning to offer 24 per cent of its shares on the DFM at an implied valuation of up to $882 million.

The report shows a surge of special purpose acquisition companies (SPAC) activity from entities exploring alternative routes to a public listing. Companies in the region have traditionally found it difficult to access US markets through the official IPO route, but SPACs have eased the accessibility and deepened the capital raising pool for these companies.

The report said the UAE has been at the forefront of this surge in SPAC activities across the region. Earlier this year, Anghami, a leading Mena music streaming platform with Lebanese roots and headquarters in Abu Dhabi, announced its intention to go public on Nasdaq by merging with Vistas Media Acquisition Company’s SPAC, at a valuation of $220 million.

Gregory Hughes, EY Mena IPO and transaction diligence leader, said IPO activity during H1 2021 was below expectations, nevertheless, the year did bring some remarkable deals with Mena companies showing an ever-increasing interest in SPAC transactions as a means to go public.

“We expect this trend to continue as companies seek to increase their international presence and gain access to a wider pool of investors. Positive equity market performances across the region offer a favorable backdrop for IPO candidates looking to list their shares and the outlook is favourable for companies which now have a variety of options when it comes to the routes available to them to access the capital markets,” said Hughes. — issacjohn@khaleejtimes.com