The Middle East and North Africa (MENA) region is characterised by a potential ground supported by macro infrastructure and scalable startups, fueling the growth in the thriving public markets.
In the last two years, with many companies taking the initial public offering (IPO) route, MENA became an ecosystem supported by favourable policies and initiatives that increased investor confidence.
According to the latest EY MENA IPO Eye Q1 2023 report by consultancy firm EY, IPOs in the MENA region have retained a strong buoyant with ten listings in Q1 2023 with combined proceeds of $3.4 billion. Globally, Q1 2023 saw 299 IPOs raising $21.5 billion. Abu Dhabi attracted a substantial sum of $3 billion in IPO proceeds, securing its position as third globally in terms of IPO capital raised during that period.
It is a 61% decrease with a 33% drop in listings and 14% in value compared to Q1 2022 year-on-year (YoY). However, IPO activity remains buoyant in the MENA region, with a promising pipeline for the year, led by enabling initiatives like the Abu Dhabi IPO Fund (ADIPOF). In addition, Saudi Arabia's Exchange (Tadawul) has announced plans to list six Saudi companies, including Meyar Construction Co., Ghida Al-Sulyan Company, Saudi Lime Industries Company, and HyperPay.
Recently, Saudi Arabia plans to launch another multi-billion-dollar offering of Aramco stock, potentially becoming one of the largest share sales in recent years. The secondary IPO of Aramco improved its attractiveness, making Saudi one of the favourable markets in the Middle East.
The volatility in the regional MENA market during 2022 remained throughout the first quarter of 2023 due to high-interest rates, an unexpected global banking collapse, and economic inflation concerns affecting investors. But at the end of Q1, six out of 10 IPOs had positive returns. This strong performance is also expected to continue in the coming quarters, with over 40 IPOs already lined up for Q2 2023 alone. The success of these listings will be a significant indicator of investor interest in MENA capital markets going forward.
In 2022, Saudi Aramco and Dubai DEWA led the MENA region to the top of the IPO value chart.
Reasons for the Middle East IPO Boom to Increase
The surge of IPOs in 2022 marked a record year, with 51 IPOs hitting the strongest trend against the backdrop of a challenging global economy. With Dubai's successful pandemic response, the Emirates attracted high net-worth individuals (HNWIs) and financial executives to its open economy. It was driven by financial regulatory reforms, better allocations for foreign investors, and political stability, which significantly contributed to the IPO frenzy.
The two dominant economies in the region have implemented significant measures to enhance opportunities for companies to operate and conduct initial public offerings (IPOs) on their respective markets. In recent years, the Abu Dhabi Securities Exchange (ADX), Saudi Arabia's Tadawul Group, and Dubai Financial Market (DFM) have all made substantial regulatory changes to align their markets with international standards, including easing foreign ownership requirements. These measures focus on streamlining the business environment and simplifying the process of going public.
As part of its privatisation campaign, the UAE listed around 10 government-related entities, including the already listed utility Dubai company DEWA, AD Ports, and road-toll company Salik.
The recent US and European banking collapses have raised concerns about a repeat of the global financial and economic crisis. However, the Middle East boomed while the rest of the world was in financial turmoil. Despite the global downturn, the MENA IPO momentum of the last few years will likely continue. It is due to solid capital market strategies, technological advancements, and full foreign ownership that subsequently attracted international investors' attention as a strong group of regional companies prepare for listings.
UAE leads FDI surge in the MENA Region
The UAE topped the charts for the increase in FDI since the pandemic globally, mainly driven by Dubai. The country attracted 792 projects, while Dubai alone attracted 1,469 FDI projects in the past three years. The recent report highlights that 62.5 percent of greenfield investments were in technology, business, and financial services.
Over the years, the UAE has fostered dynamic partnerships with investors and improved its framework of initiatives to strengthen the investment environment.
The second and third in the ranking are Saudi Arabia with 479 FDI projects, and Qatar with 245 FDI projects. A significant factor in the growth of the IPO market is the increasing foreign direct investment (FDI) to the Middle East as an investment destination.
UAE launches the world's largest IPO in Q1 2023
The Abu Dhabi Securities Exchange (ADX) in the UAE has made a significant mark on the global IPO market, listing the Abu Dhabi National Oil Co (ADNOC) Gas PLC- the world's largest IPO of Q1 2023 to date. It is the sixth company listed by the ADNOC Group, which continues the trend into 2023 with further announcements. In 2022, Adnoc raised approximately Dh9.1 billion ($2.5 billion) by selling a 5 per cent stake in its gas business. The Adnoc Logistics and Services listed this week sold out all shares of about 1.11 billion in minutes, exceeding the deal size and showing a high demand for an IPO listing in the MENA region. It is the second listing by state-owned Adnoc this year.
Moreover, Presight AI Holding, a data analytics company listed on the ADX, raised $500 million through its IPO. The company's achievement reinforces ADX as a platform for successful IPOs, highlighting the potential for innovation and growth in the region's technology-driven industries. While Abu Dhabi dominated listing activity in Q1, the Dubai market (DFM) is expected to witness large privatisation in 2023.
The latest listing in DFM was Al Ansari Financial Services, the UAE foreign exchange and money transfer company, which raised $210 million from selling a 10% stake.
The UAE generated 91% of total GCC IPO proceeds of $3.2 billion, with three IPOs in Q1 2023.
Saudi Arabia is ready to take off in the MENA IPO markets
Saudi Arabia emerged as the leader in listing public markets, showcasing its dominance with six initial public offerings (IPOs) on the Saudi Exchange (Tadawul), generating $700 million in proceeds in the first quarter of 2023. Additionally, a notable Real Estate Investment Trust (REIT) in the country successfully raised $100 million, further highlighting the thriving investment climate in Saudi Arabia.
Recently, Jamjoom Pharmaceuticals Factory Company in Saudi Arabia set its IPO price range at 1.2 billion riyals ($336 million). Other major IPOs in Saudi include BENA Steel Industries Co., Horizon Foods Co., Knowledge Net Co., etc.
Other exchanges witnessed IPOS listings in the region during Q1 2023. Abraj Energy Services SAOG, Oman's largest oilfield services provider, successfully raised $200 million through its IPO on the Muscat Stock Exchange (MSX). The subscription rate reached 8.7 times the available shares. This impressive oversubscription reflects market confidence in Abraj Energy Services and highlights the strong investment potential in Oman's oil and gas sector. The IPO's success further enhances the Muscat Stock Exchange's reputation as a platform for promising investment opportunities. In addition, the Qatar Stock Exchange (QSE) saw a direct listing by Damaan Islamic Insurance Company.
IPO pipeline for 2023
Indeed, the 2023 pipeline looks promising. Governments and private companies are keen to sell equity while there is strong interest in the region. Highlighting the major IPOs to watch out for this year:
1. Emerging Markets Property Group (UAE)
2. Lulu Group International (UAE)
3. MBC Group (Saudi)
4. Red Sea Global (Saudi)
*As posted on Linkedin