Value of Mena IPOs in fourth quarter of 2019 hits $30bn

Saudi Aramco's record-breaking market debut leads to 3,000% hike in value of Gulf market listings

Participants celebrate during the official ceremony marking the debut of Saudi Aramco's initial public offering (IPO) on the Tadawul stock market, in Riyadh in December. Reuters

The value of IPO deals in the Gulf during the last quarter of 2019 increased by more than 3,000 per cent as a result of Saudi Aramco’s record-breaking market debut.

Four IPOs took place in the Gulf, generating $29.9 billion (Dh109.8bn). Add in the $108.7bn listing of Egypt's Rameda Pharmaceuticals and the total for the wider Middle East and North Africa region topped $30bn, according to accountancy firm EY’s Mena IPO survey. This compares to just two listings in the third quarter of 2019, which raised a combined $190m.

“Both the global market and the Mena market saw activity pick up during Q4 2019,” said Matthew Benson, leader of EY’s Mena transaction advisory business.

Overall, the number of IPOs that took place in the MENA region last year fell to 14, from 26 in 2018. However, the decline was driven by the fact that there were fewer real estate investment trusts listed, and fewer companies making debuts on Saudi Arabia’s junior market, Nomu.

“IPO activity has remained broadly stable year-on-year,” Mr Benson said.

Saudi Aramco’s IPO was the world’s biggest. The company initially floated 1.5 per cent of its shares on the local exchange, Tadawul, raising $25.6bn in the process. This was eventually increased to $29.4bn when a further 450m shares were issued through a ‘greenshoe’ option, taking the total stake floated to 1.7 per cent.

Other notable listings to take place during the quarter include the $33m flotation of the company running the Kuwait stock market, Boursa Kuwait, which was the first listing in the country for a decade. Musandam Power Company also achieved a $23.1m listing of a 40 per cent stake on the Muscat Securities Market.

Several Gulf governments are taking steps to deepen capital markets by reforming rules to make listing easier. The UAE cabinet approved changes to the Agency Law in a bid to encourage listings of family companies earlier this year, and the Dubai Financial Market is in the midst of reforms that will eventually allow free zone companies to list.

In Oman, the Capital Market Authority recently approved the prospectus of the country’s first REIT, which will allow foreign investors to indirectly own property in the sultanate. In Egypt, a process to float partial stakes in government-owned companies is continuing, although timeframes have moved around as economic conditions have shifted.

“Until the Saudi Aramco IPO, economic challenges continued to impact investor confidence in the region in 2019. Though the recent MSCI and FTSE inclusions, privatisation drives, and government initiatives from GCC countries and Egypt are promising, both businesses and investors will be proceeding with caution during the first half of 2020.”