EY: Three MENA IPOs Raised $294.8 Million In Q1 2021
According to the EY MENA IPO Eye Q1 2021 report, the MENA region saw three IPOs raise total proceeds of US$294.8 million during the first quarter of 2021, a 64% drop in proceeds raised when compared with the same period in 2020. The three issuances were in the transport, power and utilities and real estate sectors.
Despite expectations for an increase in activity after an uptick in issuances in Q4 2020 - which saw four IPOs and US$925 million in proceeds – the IPO market in the MENA region had a slow start to 2021. Continued uncertainty around the impact of the ongoing pandemic has affected the MENA markets even as oil prices have continued their recovery and vaccination roll outs have been gaining speed across the region.
Globally, Q1 2021 has been the best-performing first quarter by deal number and proceeds in the last 20 years, despite the trend of Q1 being a slower period. The first quarter of 2021 saw 430 IPOs – compared to 233 in Q1 2020 – as well as US$105.6 billion in proceeds, up 271% when compared to the same quarter last year. The surge in momentum can be attributed to the ample liquidity in the financial systems; the accelerated growth of technology and new economy companies propelled by the pandemic; speculative and opportunistic transactions; and platforms that have made retail investing more accessible to the general public and young generations.
Matthew Benson, EY MENA Strategy and Transactions Leader, says:
“The MENA region’s IPO market was off to a slower than expected start in 2021, despite expectations for an increase in IPO activity after an uptick and stronger performance in Q4 of 2020, with total proceeds down by 64% in Q1 2021 when compared to the same period last year. The three IPOs during this quarter, which raised a total of US$295m in proceeds, demonstrated strong investor demand in the market, particularly in KSA — hence we expect IPO activity to bounce back over the coming months while economic conditions in the region continue to improve, aided by the accelerated vaccine rollouts and the possibility of reaching herd immunity against COVID-19.”
Saudi Arabia continues to have the most active IPO market in MENA
The Saudi Stock Exchange (Tadawul) continued to be the MENA region’s top listing venue in Q1, with two listings totaling $US281.6 million, which represented 96% of the total amount raised by MENA IPO candidates during the quarter. The previous year, it had four listings totaling $1.45 billion, representing 78% of the total amount raised by MENA IPO candidates in 2020.
The first listing on the Tadawul for 2021, Alkhorayef Water & Power Technologies, raised US$144 million by floating 30% of its shares. The offering was heavily oversubscribed, with the retail offering being oversubscribed by 1,511% and the institutional offering by 6,320%.
That IPO was followed by that of Theeb Rent a Car Company, which offered 30% of its shares to the public and raised US$138 million. As with Alkhorayef Water & Power Technologies, the Theeb IPO was heavily oversubscribed, with strong demand leading an oversubscription of 6,010% for the institutional tranche and 3,385% for the retail offering.
New initiatives announced in UAE amid economic recovery
During Q1 2021, UAE financial institutions announced a few key initiatives as the country continues to recover from the impact of the COVID-19 pandemic. The Abu Dhabi Securities Exchange (ADX) announced a new ‘ADX One’ strategy, which aims to double market capitalization over the next three years, increase market liquidity and further improve market efficiency. The new strategy will include initiatives to launch derivatives trading, an investor relations guide, as well as a program to support research coverage of stocks.
The Central Bank of the UAE (CBUAE) also announced that it expects economic activity in to continue to pick up, supporting positive growth of 2.5% during 2021. The CBUAE expects a full recovery in 2022, with overall real GDP increasing 3.5% while the non-oil real GDP is forecasted to rise by 3.9%.
Bahrain adopts new standards
In Bahrain, the Bahrain Bourse announced new plans to adopt the Global Industry Classification Standard (GICS) for listed companies effective from July 11, 2021, which is broadly in line with its overall strategy to enhance transparency and efficiency in Bahrain’s capital market and to meet best international practices. As part of this initiative, the Bahrain Bourse plans to conduct various awareness sessions and workshops with stakeholders and the public to raise awareness. The current sectorial indices will no longer be calculated with historical values continuing to be accessible on Bahrain Bourse’s website.
Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, says:
“As we look at the remainder of 2021 and beyond, there are many reasons to be optimistic about the upcoming quarters ahead. A strong IPO pipeline in key MENA markets across sectors, coupled with various government initiatives to deepen the capital markets, particularly in KSA and the UAE, should help bring more IPOs to markets in the region. Additionally, the underlying economic factors within the region remain strong and we anticipate that future IPO activity in the MENA region will reflect the overall positive signs that we are beginning to see.”
Ernst & Young
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