Abu Dhabi has accounted for 14 per cent of all initial public offerings worldwide in the first quarter of 2023, an indication of the strength of its capital markets amid a challenging global IPO market, a new study has found.
The UAE capital attracted $3 billion worth of IPO proceeds in the three months ended March, placing it third worldwide, consultancy EY said in the latest edition of its Global IPO Trends report.
The top 10 was dominated by Asian markets, which took six spots. China's Shenzhen and Shanghai took the top two, accounting for 22 per cent and 20 per cent, respectively, and raising $4.7 billion and $4.3 billion.
Abu Dhabi was followed by the tech-heavy Nasdaq Composite in New York, attracting $2.1 billion for 10 per cent of the market, making the top four and the only bourse to record double-digit shares.
The top 10 was rounded out by Indonesia, Hong Kong, Tokyo, Beijing and Italy's Borsa Italiana and AIM.
The New York Stock Exchange, Germany's Deutsche Börse and Switzerland's SIX were all tied for 10th place. Other exchanges accounted for 12 per cent, with a value of about $2.9 billion.
Overall, about $21.5 billion was raised through 299 IPOs globally in the first quarter of the year. However, these are down from the year-ago figures: proceeds dropped 61 per cent from $54.6 billion and the number of IPOs declined 8 per cent from 326, it said.
The challenging IPO environment comes as investors are prioritising value over growth, as IPO windows are “fleeting and funding conditions getting tougher” amid persistent macroeconomic and geopolitical uncertainty, Paul Go, EY's global IPO leader, wrote in the report.
The sector is also being exacerbated by stress in the global banking system, which is rooted in troubles in the US and Credit Suisse, he said.
“IPO-bound companies need to focus on building sustainable businesses with strong fundamentals to be well-positioned in a volatile environment and meet the challenges and opportunities of going public,” Mr Go said.
Abu Dhabi hosted 2023's biggest IPO when state firm Abu Dhabi National Oil Company (Adnoc) raised about Dh9.1 billion ($2.5 billion) from the sale of a 5 per cent stake in its gas business.
This followed an eventful 2022, when there were 48 listings in the Middle East.
Adnoc sold more than 3.8 billion shares, with the IPO drawing strong demand from institutional and retail investors, and generating more than $124 billion in orders. It was about 50 times oversubscribed, the company said in March.
This is in line with EY's study, which said energy led the IPO market in the first quarter, as four of the top 10 IPOs came from the sector.
IPOs continue to deliver the highest number of deals, but average transaction size is dwarfed by the energy sector. This trend is in line with the steep downwards correction in tech company valuations over the past 18 months.
With high inflation, uncertainty surrounding the world economy, rising interest rates and the war in Ukraine, Gulf capital markets stood out from their peers in 2022, benefiting from higher oil prices, a liquidity boost and stronger investor confidence.
Middle East IPOs raised more than $23 billion in 2022 from 48 listings, compared with $7.52 billion raised from 20 offerings in the previous year. That was the highest share for the Gulf region after 2019, when Saudi Aramco went public in a $29 billion offering, the world’s largest.
The strength of the East's IPO strength is reflected in the EY report: on a regional basis, the Asia-Pacific accounted for $12.7 billion from 175 IPOs, both of which are more than half of the global total.
They are, however, annually down 70 per cent and 6 per cent, respectively.
The Europe, Middle East, India and Africa region had 84 IPOs that took $6.2 billion, down 19 per cent and 36 per cent, respectively, while the Americas recorded $2.6 billion from 40 IPOs, declining 9 per cent and 11 per cent, respectively.
Despite a tepid first quarter, the IPO pipeline continues to build in anticipation of a better window of opportunity, possibly in the latter part of 2023, EY said.
“Any initial euphoria at the start of the year was quickly dampened by the unexpected inflation and interest rate outlook, with the mood further stifled by the latest turmoil in the global banking system,” it said.
“IPO numbers are holding up but mega transactions are missing in the current quarter, as both investors and companies await better market conditions and a more positive investor sentiment.”