EY: 4 MENA IPO Deals Raise US$814.2m In Q1 2020

According to the EY MENA IPO Eye Report, the MENA region recorded an increase in IPO volume and value during Q1 2020, with four IPOs- including one REIT listing -raising total proceeds of US$814.2m. This represents a 14-fold increase when compared to the US$57.6m raised from one IPO in the same period last year.

Global IPO exchange activity also continued to pick up in Q1 2020, with 235 IPOs raising US$28.5b in IPO value during Q1 2020, compared to US$15.1b in the same quarter of the previous year.

Matthew Benson, MENA Transaction Advisory Services Leader, EY, says:

“The year began with strong optimism and promise for the IPO market in the MENA region. Following the interest in Saudi Aramco’s IPO, there was a marked increase in companies pursuing listings on GCC stock exchanges. The drop in economic growth and disruption across various industries caused by the COVID-19 pandemic, as well as the decline in demand for oil, and reduction in oil prices, have forced potential issuers to rethink timelines and delay their bourse debuts – a prudent move given the current market scenario. Potential issuers nevertheless continue to seek new capital, in some cases driven by the current market environment.”

Saudi Arabia leads activity as Oman and Egypt also list IPOs

The Saudi SE led IPO activity in the MENA region with two listings in Q1 2020 with net proceeds totaling US$748.7m. Dr. Sulaiman Al-Habib Medical Services Group raised US$700.9m (main market) by issuing 15% of its shares, while Sumou Real Estate Co raised US$47.8m (Nomu market) by issuing 30% of its shares.

Saudi Aramco’s listing on its exchange has sent the Tadawul (already the Middle East’s largest bourse) to ninth place globally in terms of market capitalization.A major development was the decision by the Kingdom to downsize its 2020 budget due to the economic conditions caused by COVID-19 and falling oil prices.

In Oman, Aman REIF, a REIT listing, floated 50% of its shares on the Muscat SE in a deal that raised US$52.5m in January 2020.

In Egypt, Emerald Real Estate Investments raised US$13.0m in February 2020 by offering 28% of its shares and was oversubscribed 134%.

The Egyptian capital market was expecting as many as 14 companies to go public in 2020, however the market is experiencing delays in listing plans due to the impact of COVID-19 on both local and global stock markets.

GCC countries adopt additional standards and explore privatization

The Bahrain Bourse adopted new listing rules and allowed a three-month grace period for companies currently listed on the market to meet new requirements.

Kuwait strengthened its capital markets with the privatization of its stock exchange in December 2019 and the introduction of the BK Main 50 Index. When Kuwait upgrades its equities to its main emerging markets index in 2020, it could trigger billions of dollars in inflows from passive funds.

Gregory Hughes, MENA IPO Leader, EY, says:

“We have seen that capital markets around the region have granted additional flexibility to public companies during the COVID-19 crisis period. The IPO markets are not likely to quickly rebound in Q2 or Q3 2020, but we are aware of several companies that are preparing for offerings after this period. Investor sentiment will continue to be cautious, given significant volatility in the markets and uncertainty regarding future events including COVID-19 impact, oil pricing, and the U.S. elections amongst other things.”