Oman: IPO activity in the Middle East and North Africa (MENA) region continued to gather momentum with a total of $1.8 billion in proceeds from 13 initial public offerings (IPOs), according to a new report.
“This is a 44 percent increase in the number of listings but an 80 percent drop in proceeds when compared to the second quarter of 2022,” according to the EY MENA IPO Eye Q2 2023 report.
The growth in the second quarter (Q2) of 2023 was driven predominately by the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE). KSA dominated the region’s IPO activity in terms of the number of listings in Q2 2023, with four listings on the Tadawul main market raising $0.8 billion and seven IPOs on the Tadawul (Nomu) parallel market with proceeds of $0.1 billion. Jamjoom Pharmaceuticals Factory Company raised $336 million, the highest raise on the Tadawul for the quarter, followed by First Milling Company which raised $266.4 million. Both offered a free float of 30 percent of the company’s share capital and were oversubscribed, the report further said.
In the UAE, the Abu Dhabi Securities Exchange (ADX) completed its largest IPO of the quarter with Adnoc L&S raising $769.5 million. The IPO saw the largest demand globally for a transaction so far in 2023, with an oversubscription level of 163x in aggregate – the highest oversubscription for a UAE book-build IPO.
On the Dubai Financial Market (DFM), Al Ansari Financial Services was the UAE’s first family-owned company to be listed, raising $210.4 million in proceeds.
“The second quarter of 2023 confirmed that Mena IPOs are not experiencing the downward trend witnessed globally. The UAE and Saudi Arabia continue to be the most active markets in the Mena region in terms of both the number and size of IPOs,” Brad Watson, EY MENA Strategy and Transactions Leader said.
“As just one example, Adnoc’s second portfolio company listing in 2023 outpaced the global markets in terms of demand. The Mena region continues to have strong economies and low debt; coupled with the reform and deregulation in the region, it continues to be an attractive environment for new listings,” he added.
Overall, in the first half (H1) 2023, the Mena IPO market registered a total of 23 IPOs (4 percent year-on-year decrease), all of which were in the Gulf Cooperation Council (GCC) with total proceeds of $5.2 billion.
While the general Europe, Middle East, India, and Africa (EMEIA) region continues to see a significant contraction in IPO values, the Mena region has a promising pipeline for the rest of the year, particularly from KSA. So far, 23 Saudi companies have announced their listing plans on the Tadawul for H2 2023. Further afield, two companies in Egypt intend to list, indicating a strong pipeline of IPOs to come in the remainder of the year.
“The Mena IPO pipeline for H2 2023 and 2024 remains very healthy with several IPOs already announced in KSA and multiple processes ongoing across the broader region, with further transactions planned in the UAE, Oman, Qatar, and Kuwait,” Gregory Hughes, EY MENA IPO, and Transaction Diligence Leader said.
“We see planned IPO activity across different sectors and from a combination of family business, state-backed enterprise, and private equity stakeholders. MENA has been a bright spot in the much more subdued global IPO market, and we expect this to continue in the future, especially with international businesses also exploring listings in this region,” he added.
Impact of Oil Prices
EY analysis shows that the global economic picture in H1 2023 was impacted by volatility in the Organization of the Petroleum Exporting Countries (Opec) and Brent crude prices, which rose in January and February 2023 before falling sharply around mid-March 2023.
The rise in January was due to the stronger-than-expected growth in China’s economy, which boosted demand for oil. The fall in March led to concerns about a global recession and expectations of higher interest rates.
Oil prices rebounded in April 2023 as the financial market stabilized and expectations of higher interest rates eased. Opec+ announced production cuts in early April, which provided further support to prices. Crude oil prices witnessed relatively lesser volatility in June with prices settling at lower levels of $71 per barrel to $77 per barrel as concerns about the global economy weighed on demand. However, further production cuts by Opec+ and KSA are expected to support prices in the coming months.