Value of Gulf IPO deals jumps to $801.3m in first quarter

Saudi Aramco's record-breaking market debut in late 2019 encouraged more activity in the kingdom

(FILES) This file photo taken on December 12, 2019, shows a view of the sign showing the logo of Saudi Arabia's Stock Exchange Market (Tadawul) bourse in the capital Riyadh. Saudi's stock exchange fell 6.5 percent, shares in oil giant Saudi Aramco dropped below their IPO price for their first time, and other Gulf markets tumbled to multi-year lows at the start of trading after OPEC and its allies failed to clinch a deal over oil production cuts. / AFP / FAYEZ NURELDINE

The value of IPO deals in the Gulf jumped 14-fold year-on-year in the first quarter of 2020 as companies eyed listing on Gulf bourses following Saudi Aramco’s record-breaking market debut late last year.

Three IPOs were recorded in the Gulf during the first three months of the year, raising $801.3 million (Dh2.94bn), compared to one listing worth $57.6m in the same quarter a year ago, according to consultancy EY's Mena IPO report.

The value of deals in the Middle East and North Africa reached $814.2m during the first quarter of this year, helped by Egypt's Emerald Real Estate Investments listing that raised $13m in February.

"The year began with strong optimism and promise for the IPO market in the Mena region," Matthew Benson, leader of EY's Mena transaction advisory services, said. "Following the interest in Saudi Aramco’s IPO, there was a marked increase in companies pursuing listings on GCC stock exchanges."

Two of the three GCC listings in the quarter were on Saudi Arabia's exchange, with the largest being the $700.9m listing of Dr Sulaiman Al Habib Medical Services Company, a healthcare group operating hospitals, medical centres and pharmacies.

The number and value of IPO deals declined quarter-on-quarter.

Listings could slow further during the current quarter, though, as the pandemic has hit company earnings and put a dent in the plans of potential issuers. As a result, IPO markets in the Mena region are unlikely to rebound quickly in the second or third quarter of this year, according to Gregory Hughes, leader of EY's Mena IPO business.

"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 US elections amongst other things," Mr Hughes said.

The drop in economic growth, disruption in various industries from tourism to manufacturing, decline in oil demand and the drop in oil prices have forced potential issuers to rethink the timing of their debut and delay their offerings, Mr Benson said.
The delay is "a prudent move given the current market scenario", he said. "Potential issuers nevertheless continue to seek new capital, in some cases driven by the current market environment."

For example, the Egyptian capital market was expecting as many as 14 companies to go public in 2020 as a programme to list stakes in state-owned enterprises moves ahead, but the market is seeing delays in listing plans due to the impact of Covid-19 on both local and global stock markets, the consultancy said.

However, several companies in Mena are preparing for offerings after the third quarter of 2020, according to EY.

The pandemic and measures to contain the deadly virus have pushed the global economy into the deepest recession since the Second World War, with per capita output declining in the largest fraction of economies since 1870, the World Bank said this week. 

The global economy is expected to shrink 5.2 per cent in 2020, a sharp revision from the 2.5 per cent growth projection the World Bank had made in January. It now expects per capita incomes to decline 3.6 per cent in all regions of the world.