Capital Market

Favorable market conditions support uptick of GCC IPOs in 2022

Marmore Team

07 February 2023

Activity in the GlobalrnIPO markets were subdued in 2022, after scaling multi-year highs in 2021. Volatilityrnin global markets, particularly in US and Europe have made market conditionsrnunfavorable for IPOs in 2022. Headwinds such as high inflation, geopoliticalrntensions in Russia and Ukraine and aggressive central bank tightening were somernof the factors that led to heightened volatility. Onrnthe flipside, GCC IPOs witnessed a sharp uptick in 2022 compared to thernprevious year with higher oilrnprices, comparatively lower inflation and stronger economic growth providing a positivernplatform for companies to list in the domestic exchanges. GCC region accountedrnfor about 23% of the USD 179.5[1]rnbillion raised in all IPOs worldwide in 2022. This is a major rise compared to previousrnyears, where in 2021 the region accounted for only 2%[2] ofrnthe global IPO proceeds.

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IPOs ofrnmajor markets in comparison with GCC markets


Source:rnRefinitiv (includes dual listing)

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KSA and UAE dominated the listings in the GCC. State owned entity Dubai Electricityrnand Water Authority (DEWA) was the largest listing in terms of value in 2022 raisingrnUSD 6.1 billion. DEWA, Borouge and Luberef were the 3 state owned entities inrnthe top 5 listings indicating UAE government entities initiatives to go public.

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Top 5rnGCC IPOs in 2022, By Value


Source:rnRefinitiv

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Dominance of KSArnand UAE

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Supported by higherrnoil prices and the governments reform agenda in line with vision 2030 (unveiledrnin 2016), KSA’s IPO tally rose to 33 in 2022 as compared to 15 in 2021. KSA’srnmajor listing following the dual listing of UAE based Americana, in 2022 was ofrnpharmaceutical giant Nahdi Medical at USD 1.4 Billion. A total of 3,900,000rnshares were allotted to the individual investors representing 10%[3] ofrnthe total offering. The retail offering followed the completion of therninstitutional book-building process, which was oversubscribed 59 times. NahdirnMedical’s share rose 11% by the end of 2022 since its listing on 15thrnMarch.

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KSA IPOrnactivity since 2015


Source – PWC andrnRefinitiv

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Another major listingrnwas of Saudi Aramco Base Oil Company (Luberef) worth USD 1.3 Billion. Thernnumber of shares offered to individual investors was 12,511,250 representingrn25%[4] ofrnthe total offering shares. This was after the successful completion of the bookrnbuilding process that was oversubscribed by 29.5 times.

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IPOs in UAE increased fromrn4 in 2021 to 9 in 2022. The listing of UAE’s state-owned entity DubairnElectricity And Water Authority (DEWA) worth USD 6 billion was the biggestrnequity market deal in the GCC, in 2022. The listing of DEWA is a part of the country’srnplans to list 10 state-owned firms to boost the size of the Emirate's stockrnexchange to Dh3 trillion[5]rnand to create a Dh2 billion [6]rnmarket maker fund to encourage the listing of more private companies inrnindustries like energy, logistics, and retail. Another highlight of UAE’s IPOrnlisting in 2022 was the joint Abu Dhabi-Riyadh listing of food giant Americanarnworth USD 1.8 billion. The joint listing was the first of its kind in the Saudirnand Abu Dhabi exchange. Americana’s decision to list its shares on both marketsrnwas to increase their access to capital and provide more liquidity. The UAE hasrnfurther looked to strengthen IPO activity with initiatives such as The Thabatrnprogram. The program aims to transform 200 family business projects into majorrncompanies by 2030 with a market value exceeding USD40 Billion[7]. Thisrnis done by supporting business ideas into viable projects, encouraging firms torndo business outside their traditional fields and embrace advancedrnknowledge-driven industries such as artificial intelligence, biotechnology,rnagricultural technology, space sciences and renewable energy.

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Oman’s IPO activityrnhas been limited with 4 listings in the last 3 years. Oman and Bahrain are the only GCC countries notrnclassified as emerging markets by MSCI Inc[8].rnThe market capitalization of Oman’s stock exchange is about USD21 billion[9]..rnIn September 2022, Oman’s Muscat Stock Exchange (MSX) teamed up with UnitedrnArab Emirates-based Al Ramz Corporation Investment and Development PJSC andrnOman-based Ubhar Capital SAOC to formulate capital market opportunities. ThernMSX also joined a platform known as Tabadul that will enable companies listedrnon the Omani bourse to trade on the Abu Dhabi and Bahrain stock exchanges tornboost liquidity.

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Ali- Alghanim and Sons, a family-owned conglomerate, is Kuwait’s onlyrnlisting in 2022.

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Despite an inflow of USD 4 Billion in foreign investments and heightenedrneconomic activity due to the World Cup, Qatar has not had any listings in 2022.rnThis could be due to companies awaiting peak performance of markets to raisernequity at higher valuations and better listing support.

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Conclusion

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KSA and UAE dominated GCC IPOs in 2022, comprising 93.5% of the totalrnlistings by deal count. The other 4 GCC nations have had lesser listingsrndespite strong potential. This can be attributed to relatively lesser reformsrnand programs offered by respective capital market authorities to supportrnlistings which are offered by KSA and UAE.

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The outlook for 2023 looks positive with Saudi Arabia looking to list itsrnvast oil trading division Aramco Trading and the government working on issuingrnfollow-on shares of Saudi Aramco. Abu Dhabi has shortlisted 6 private companiesrnto receive investment and advisory services to list in its local bourse as arnpart of it USD 1.3 Billion [10]rnfund launched in 2021 to support private companies. However, factors such asrnrecession, rising interest rates and a decrease in demand for oil couldrnthreaten the market sentiment.

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[1] EYrnReport

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[2] National News

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[3] Trade Arabia

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[4] Zawya

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[5] The National News

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[6] The National News

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[7]rnUAE Media Office

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[8] Bloomberg

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[9] Refinitiv

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[10] Reuters

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