Saudi tops IPO activity; 6 MENA deals raise $2,822mln in Q2 2019

Global IPO exchange activity continued to pick up in Q2 2019, with 302 IPOs raising $56.8bln

A broker monitors stock prices on a screen at the Saudi Investment Bank in Riyadh September 5, 2013.

A broker monitors stock prices on a screen at the Saudi Investment Bank in Riyadh September 5, 2013.

REUTERS/Faisal Al Nasser

The second quarter of the year witnessed an improvement in Initial Public Offer (IPO) activity in the MENA region despite a dip in volume.

IPO deal value increased by 222.6 percent to $2,822.5 million in Q2 2019, up from $874.9 million during the same time last year, professional services firm EY said in its latest report MENA IPO Eye.

In terms of volume, only six deals were recorded in Q2 2019, including one REIT listing, a decrease of 33.3 percent from the nine deals listed in Q2 2018.

However, on quarter-on-quarter basis, IPO activity increased both in volume and value, when compared to a single IPO that raised $57.6 million in Q1 2019. 

Gregory Hughes, MENA IPO Leader, EY, said: “The increase in IPO activity across the MENA region during the second quarter of this year, which included two cross-border listings, is proof that companies are still keen to execute IPOs and gain access to international investors and stock markets.”

“The IPO deal value raised in the first half of 2019 has already nearly surpassed the total deal value raised in 2018,” he added.

While the UAE witnessed two cross-border listings with proceeds of $1,797.9 million in Q2 2019, Saudi Arabia led the MENA region with three listings on the main market in Q2 2019 with net proceeds of $1,023.4 million.

Arabian Centres Company, one of the largest IPOs in Saudi Arabia with proceeds of $658.7 million, was the first in the country that allowed the sale of securities to qualified institutional buyers in the US. Maharah Human Resources Company and Shuaa REIT Fund raised IPO net proceeds of $207 million and $157.7 million respectively.

UAE-based fintech companies Network International Holdings raised $1.4 billion in April and Finablr raised $397.9 million in May. Both firms listed on the on the Premium Segment of the London Stock Exchange.

“Across the MENA region, IPO activity is expected to progress cautiously, with an optimistic outlook owing to events and themes such as the MSCI and FTSE inclusions, privatization drives, and government initiatives,” said Hughes.

Global IPO exchange activity continued to pick up in Q2 2019, with 302 IPOs raising $56.8 billion, marking an increase of 47.3 percent in IPO volumes compared with Q1 2019, despite the US-China trade tensions and uncertainties related to Brexit. Health care, technology, and the industrial sector remained the top three sectors by the number of IPOs issued during Q2 2019.

Broader outlook

The EY report highlighted the premises in various GCC countries and Egypt that could support a listing environment as well as attract more investors to the market.

In order to facilitate onshore listing of UAE free zone companies, the Securities and Commodities Authority (SCA) has published the proposed amendments in 2019. Based on the proposed listing rules, the company should meet certain conditions such as:

  • The fully paid-up share capital shall not be less than $5.4 million (20 million dirhams).
  • Shares offered must be between 30 percent to 70 percent of the issued share capital.
  • Shares offered must be restricted to qualified investors only.
  • Financial statements must be audited for two financial years.
  • Provision of no-objection from the regulatory body of the relevant free zone.

As part of Vision 2030, the Saudi Government has planned privatization deals worth $533 million, to be carried out by the end of 2019.

The privatization program focuses on the transfer of ownership through IPOs, asset sales, and public-private partnerships (PPP). The Saudi government also remains committed to the Aramco IPO, which is expected to take place between 2020 and early 2021, the EY report said.

It said Kuwait’s capital market will attract around $10 billion of additional investor flows from passive funds with MSCI’s announcement of upgrading Kuwaiti equities to its main Emerging Markets Index in 2020.

Other highlights in the report included:

Qatar plans to privatize its stock exchange, with three to four listings each year to ensure a regular schedule of IPOs, which in turn would increase trading activity and liquidity as well as offer investors greater opportunities. The QSE is also considering adding a new Energy Index in 2019.

In accordance with the new Commercial Companies Law, the Government of Oman is planning to issue new regulations related to matters including listings of new companies, sukuks and other debt funds. The new law is aimed at building a more robust capital market.

The Egyptian Government is seeking to offer 23 public companies on the Egyptian Exchange (EGX) during the next 24 and 30 months.

(Writing by Seban Scaria, editing by Anoop Menon)

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© ZAWYA 2019

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