MENA IPO activity to pick up in 2021 on back of positive regulatory changes

Fiscal stimulus measures, abundant liquidity and vaccine confidence will sustain IPO momentum, says EY

Businessman checking stock market data. Image used for illustrative purpose.

Businessman checking stock market data. Image used for illustrative purpose.

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There is a strong initial public offering (IPO) pipeline in key MENA markets and activity is set to pick up gradually during 2021, said a new report by EY.

“Although MENA IPO activity remained relatively quiet in 2020, several regulators across the region announced positive regulatory changes during the year that bode well for future and existing public companies,” said Gregory Hughes, MENA IPO and Transaction Diligence Leader.

“We have also seen some interest in mergers with US-listed Special Purpose Acquisition Companies (SPACs) in recent months following some limited activity in this area in the last two years from the region,” he added in the MENA IPO Eye Q4 2020 report.

The continued fiscal stimulus measures, an abundance of liquidity and growing confidence in COVID-19 vaccination programs will sustain positive IPO momentum, the report said.

The several new initiatives also launched in the UAE in 2020 will bolster IPO activity in the years ahead. Alison Hubbard, MENA Law Leader, EY Law LLP, said: “The 2020 amendments to the Companies Law bode well for the overall development of capital markets in the UAE. Increased flexibility in foreign ownership, changes to the nationality requirements of board members and the increase in the proportion of share capital that owners may now sell, to name a few, are expected to lead to an increase in the number of IPO candidates in the Emirates.”

The MENA region saw nine IPOs raise proceeds of $1.86 billion, a fall of 40 percent in total issuances and 94 percent in total proceeds when compared with 2019.

Out of the nine issuances, six were in the real estate sector, of which two were real estate investment trusts (REITs), with the remaining in the health care, consumer staples and insurance sectors, the report said.

Rebound in last quarter

After a quiet Q2 and one IPO in Q3, the fourth quarter saw a rebound with four IPOs in the MENA region raising $925 million in total. Although the number of IPOs decreased by 33 percent and proceeds were down 97 percent compared with the same quarter in 2019, Q4 did have the highest proceeds of 2020.

In Abu Dhabi, the companies Saweed Holding, Easy Lease, Palm Sports and Zee Stores were listed on the Abu Dhabi Securities Exchange (ADX) Second Market for Private Joint Stock Companies in Q4 2020. ADQ, the full shareholder of the ADX, also launched Q Market Makers (QMM) during Q4 2020 – which is expected to access the funding allocated to the Abu Dhabi Economic Stimulus Package to enhance market liquidity on the ADX.

During 2020, Al Mal Capital REIT raised $95.3 million and officially listed on the Dubai Financial Market (DFM) in January 2021, the UAE’s first IPO in years.

The issuance was the first REIT listing on the exchange and brought the total number of REIT listings in the UAE to three; with Emirates REIT and ENBD REIT being listed on Nasdaq Dubai.

At the start of Q4 2020, the DFM launched their equity derivatives platform for single stock futures (SSF). Nasdaq Dubai also announced its Growth Market for SMEs during the quarter, with the launch expected in early 2021. The creation of the Growth Market has been facilitated by developments in the regulatory framework supporting the exchange following consultation with market participants.

Saudi Arabia continues to lead

Saudi Arabia continued to have the most active IPO market in the MENA region in terms of both issuances and proceeds. Tadawul was MENA’s top listing venue for the year with four listings totaling $1.45 billion, which represented 78 percent of the total amount raised by MENA IPO candidates in 2020.

The fourth quarter in 2020 was the strongest quarter for IPOs based on proceeds, primarily due to the listing of BinDawood Holding ($584 million), which was the second-largest listing of the year after Dr. Sulaiman Al-Habib Medical Services Group Company ($$701 million) listed in Q1 2020. Both listings were on Tadawul’s main market.

(Reporting by Brinda Darasha; editing by Daniel Luiz)

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