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Analysts upbeat on MENA IPOs despite Q3 decline

Saudi Arabia takes center stage in the IPO market, with five out of the six listings coming from the kingdom.

Analysts upbeat on MENA IPOs despite Q3 decline
[Source photo: Anvita Gupta/Fast Company Middle East]

For companies seeking to raise capital through IPOs, the MENA market presents attractive opportunities. With a growing pool of investors and a supportive regulatory environment, the exchanges offer a viable platform for companies to expand their reach and fuel their growth.

But, a new report from consultancy firm EY shows the MENA IPO market witnessed a notable slowdown in the third quarter of 2023, with only six companies raising a total of $523 million, a significant drop from the $1.54 billion raised in Q3 2022. This marked a 14% decrease in IPOs and a 66% reduction in proceeds year-on-year.

Despite the decline, the overall sentiment towards MENA IPOs remains positive, with analysts pointing to a strong pipeline of potential listings in the coming months. The region’s economic fundamentals remain strong, and investor appetite for MENA equities continues to grow.

The GCC region continued to dominate the MENA IPO landscape, accounting for all six listings this quarter, with Saudi Arabia taking center stage in the IPO Market, with five out of the six listings coming from the kingdom. 

This is due to the country’s strong economic growth, commitment to diversifying its economy, and the increasing attractiveness of its capital markets to investors.

Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, said he remained optimistic despite the slowdown in Q3. “The remainder of 2023 and 2024 will show a healthy number of IPOs based on current pipelines”. 

“However, we are facing a risk that the ongoing geopolitical challenges in the region will adversely impact investor sentiment.”

The momentum is expected to continue in the remainder of 2023 and into 2024, with several prominent companies announcing their intention to list on MENA exchanges.

Saudi Arabia is leading the way with 27 companies planning to list on Tadawul. At the same time, the UAE is also expected to see significant listings from government-owned and private companies, including Dubai’s Roads and Transport Authority.

The largest IPO of the quarter was Lumi Rental Co, which raised $ 291 million on the Tadawul main market. This was followed by Meeza Qstp LLC, which raised $193 million on the Qatar Stock Exchange. The landmark IPO of OQ Gas Networks was heavily oversubscribed and the largest IPO for the Muscat Stock Exchange.

Brad Watson, EY MENA Strategy and Transactions leader, said, “The UAE and Saudi Arabia continue to be the most active markets in the MENA region in terms of both the number and size of IPOs. As just one example, ADNOC’s second portfolio company listing in 2023 outpaced the global markets in terms of demand.”

“The MENA region continues to have strong economies and low debt; coupled with the reform and deregulation in the region, it continues to be an attractive environment for new listings.”

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