According to the EY MENA IPO Eye Report, MENA IPO deal value increased by 222.6% to US$2,822.5m in Q2 2019, up from US$874.9m in Q2 2018. Six deals were recorded in Q2 2019, including one REIT listing, a decrease of 33.3% from the nine deals listed in Q2 2018.
The second quarter of the year witnessed a sizeable improvement in IPO activity, both in volume and value, when compared to a single IPO that raised US$57.6m in Q1 2019.
Gregory Hughes, MENA IPO Leader, EY, says: “The increase in IPO activity across the MENA region during the second quarter of this year, which included two cross-border listings, is proof that companies are still keen to execute IPOs and gain access to international investors and stock markets. The IPO deal value raised in the first half of 2019 has already nearly surpassed the total deal value raised in 2018.”
Saudi Arabia leads IPO activity in Q2 2019, plans for additional privatization activity
Saudi Arabia led the IPO activity in the MENA region with three listings on the main market in Q2 2019 with net proceeds of US$1,023.4m. Arabian Centres Company Limited, one of the largest IPOs in the country with proceeds of US$658.7m, was the first IPO that allowed the sale of securities to qualified institutional buyers in the United States. Maharah Human Resources Company and Shuaa REIT Fund raised IPO net proceeds of US$207.0m and US$157.7m respectively.
The MSCI’s addition of Saudi stocks to its Emerging Markets Index is taking place in two phases, with the first phase completed in June 2019 and the second phase due in August 2019. Three of five tranches of Saudi stocks have joined the FTSE Emerging-Market Index this year and the inclusion is expected to be fully completed by December 2019.
As part of Vision 2030, the Saudi Government has planned privatization deals worth US$533.0m to be carried out by the end of 2019. The privatization program focuses on the transfer of ownership through IPOs, asset sales, and public-private partnerships. The government also remains committed to the Aramco IPO, which is expected to take place between 2020 and early 2021.
UAE sees two cross-border listings in the technology sector
The United Arab Emirates witnessed the cross-border listings of two fintech companies on the Premium Segment of the London Stock Exchange, raising net proceeds of US$1,797.9m in Q2 2019. Network International Holdings Limited raised US$1,400.0m when listed in April and Finablr PLC raised US$397.9m with its listing in May.
In addition, the Securities and Commodities Authority (SCA) has published the proposed amendments in 2019 to facilitate the onshore listing of UAE free zone companies. Based on the proposed listing rules, companies should meet certain conditions such as: the fully paid-up share capital shall not be less than US$5.4m (AED20m), shares offered must be between 30% to 70% of the issued share capital, offers must be restricted to qualified investors only, audited financial statements for two financial years should be in place, and the company must provide no-objection certificates from the regulatory body of the relevant free zone.
GCC countries focused on trading and investor opportunities
With MSCI’s announcement of upgrading Kuwaiti equities to its main Emerging Markets Index in 2020, it has been reported that Kuwait’s capital market will attract around US$10b of additional investor flows from passive funds.
Qatar announced plans to privatize its stock exchange with three to four listings each year to ensure a regular schedule of IPOs, which in turn would increase trading activity and liquidity as well as offer investors greater opportunities. The Qatar Stock Exchange is also considering adding a new Energy Index in 2019.
In line with the new Commercial Companies Law, the Government of Oman is planning to issue new regulations related to topics such as the listings of new companies, sukuks, and other debt funds. The new law is aimed at building a more robust capital market.
“Across the MENA region, IPO activity is expected to progress cautiously, with an optimistic outlook owing to events and themes such as the MSCI and FTSE inclusions, privatization drives, and government initiatives,” adds Gregory.
Global IPO activity increases in Q2 2019
Global IPO exchange activity continued to pick up in Q2 2019, with 302 IPOs raising US$56.8b, marking an increase of 47.3% in IPO volumes compared with Q1 2019, despite the US-China trade tensions and uncertainties related to Brexit. Health care, technology, and the industrial sector remained the top three sectors by the number of IPOs issued during Q2 2019.