Public listings in Mena markets set to rise in 2021, EY says

Middle East and North African companies raised a total of $925m by going public in the fourth quarter of last year

Saudi Arabia's Tadawul is expected to see more than 10 listings in 2021, EY says. Reuters

More companies in the Middle East and North Africa are expected to go public in 2021 after the number of listings and money raised dropped last year, according to the consultancy EY.

Renewed optimism for a gradual pick-up in public offerings in regional markets is driven by regulatory changes that support public companies, EY said in a report on listings in the region. The consultancy expects more than 10 initial public offerings (IPOs) in Saudi Arabia this year and accelerated listing plans by private and state-owned companies in Egypt.

"As 2021 begins, we believe that continued fiscal stimulus measures, an abundance of liquidity, and growing confidence in Covid-19 vaccination programmes will sustain positive IPO momentum," Matthew Benson, EY Mena strategy and transactions leader, said.

In 2020, the Mena region recorded nine IPOs that raised $1.86 billion, a 40 per cent drop in total issuances and 94 per cent decline in total proceeds compared to 2019. Six of the nine IPOs were in the real estate sector, with the remainder in healthcare, consumer stables and insurance sectors, according to the report.

Despite a subdued year, the fourth quarter of 2020 saw a rebound in activity after a quiet second quarter and one IPO in the third quarter, with four IPOs in Mena raising a total of $925 million.

“A decline in economic growth and significant disruption across various industries caused by the Covid-19 pandemic, together with a decrease in demand for oil, had a considerable impact on Mena stock performances in 2020," Mr Benson said.

This year, however, the outlook for IPO markets in the Gulf looks promising, according to EY.

Saudi Arabia is expected to see more than 10 listings in 2021 – with the most notable development being the region’s largest exchange, Tadawul, preparing for its own IPO during the year.

"The outlook for the kingdom’s markets remains positive for 2021 and as Tadawul continues its growth and status in the international capital markets, it proves to be an important avenue for investors looking to deploy domestic capital," Abdulrahman Moulay Albizioui, EY Saudi Arabia strategy and transactions leader, said.

The UAE, which made regulatory overhauls last year to further encourage listings on the local markets, is also expected to see an uptick in IPOs.

"The 2020 amendments to the Companies Law bode well for the overall development of the capital market in the UAE,"  Alison Hubbard, EY Mena law leader, said.

"Increased flexibility in foreign ownership, changes to the nationality requirements of board members and the increase in the proportion of share capital that owners may now sell, to name a few, are expected to lead to an increase of IPO candidates in the Emirates."

IPO activity is also expected to rise In Egypt, with numerous issuers in the pipeline, EY said.

"Looking ahead, private as well as state-owned companies are expected to play a greater role in accelerating their IPO plans in 2021," Sherif El -Kilany EY country managing partner for Egypt, said, adding that the rollout of Covid-19 vaccines will also help help momentum.

Globally, IPO numbers were up 19 per cent in 2020, while proceeds increased 29 per cent, from 2019. Last year saw 1,363 IPOs with total proceeds of $268.0bn, the highest proceeds since 2010, when $290.2bn was raised through 1,361 listing deals.

In 2020, the most active sectors were technology, industrials and health care, which accounted for 59 per cent of global IPO deals and 64 per cent of proceeds.