Historic Year for MENA Markets, with 21 IPOs Raising $7.9 Billion in 2021

According to the EY MENA IPO Eye Q4 2021 report, the MENA region saw 21 IPOs raise proceeds of US$7.9 billion in 2021, an increase of 133% in total issuances and 325% in total proceeds when compared to 2020. 

The year’s biggest IPOs in value in MENA were in the utilities, energy and financial services sectors, with Saudi Arabia’s International Company for Water and Power Projects (ACWA Power Company) leading with proceeds of US$1,211.4 million on the Tadawul. The Tadawul main market saw five IPOs in Q4 alone, with a further two on the Nomu-Parallel Market. The region’s second largest IPO in value in 2021 was in the energy sector, with the ADNOC Drilling Company securing proceeds of US$1.1 billion in Q4 on the Abu Dhabi Securities Exchange (ADX). 

Major market activity returned to the MENA region, with thirteen issuances raising US$5.6 billion in proceeds for the year. Globally, 2021 was the most active year for the IPO market for over 20 years, with a total of 2,388 deals raising US$453.3 billion in proceeds - a 64% and 67% respective increase Y-O-Y.  Europe, the Middle East, and Africa exchanges produced the highest growth seeing a 158% increase in the number of IPOs (724) and a 214% increase by proceeds (US$109.4b). 

Brad Watson, EY MENA Strategy and Transactions Leader, says: 

“MENA IPOs had a record year in 2021, with an unprecedented surge in issuances, which was driven by a combination of supportive regional regulatory actions as well as a shift in investor sentiment back towards MENA markets. IPO activity was particularly encouraging during the fourth quarter when Saudi Arabia’s ACWA POWER became the region’s largest IPO in the year, followed closely by the listing of ADNOC Drilling Company.”

Strong index returns across MENA equity markets

MENA equity markets had a stellar performance during 2021, with the observed markets all generating double-digit returns. The top performer for 2021 in the MENA equity markets was Abu Dhabi, with a return of 68%, followed by the Tadawul, with its index up by 30% for the year. The Dubai Financial Market was up by 28%, followed by the Boursa Kuwait Premier Market Index, which grew by 26.2%. The Bahrain All Share Index increased by 21%, while in Oman, the MSX 30 Index returned 13%. The index performance in Qatar reached 11%, and in Egypt, the EGX 30 Index was up by 10%.

UAE issues second-largest MENA IPO; introduces several regulations

The Abu Dhabi Securities Exchange (ADX) welcomed the listing of ADNOC Drilling Company P.J.S.C., which raised US$1.1 billion and was the second largest IPO in MENA during 2021. Fertiglobe plc became the first listing of a free-zone company on the ADX, with an IPO raising US$795 million in proceeds.

Furthermore, Abu Dhabi launched a US$1.3 billion IPO Fund, to help encourage and support private companies to list on the local stock market. The IPO fund will invest in five to ten private companies a year, with a special focus on small and medium enterprises. 

ADX and Abu Dhabi’s Department of Economic Development (DED) also submitted a proposal to the Securities and Commodities Authority (SCA) for the introduction of a Special Purpose Acquisition Company (SPAC) regulatory framework, in a move to provide more alternatives to issuers. The SCA subsequently approved the region’s first SPAC regulatory framework paving the way for SPAC listings on the ADX. 

Towards the end of the year, Dubai announced the listing of 10 government and state-owned companies on the Dubai Financial Market (DFM) as part of accelerating new listings in various sectors, including energy, logistics and retail. Dubai is further planning to encourage private and family-owned businesses to list on its stock market to bring back much-needed activity and liquidity. Additionally, Dubai launched a Dh1 billion ($272.3 million) Future District Fund to support technology companies and encourage them to list on the DFM.

Saudi Arabia issues largest IPO in MENA during Q4

Saudi Arabia’s largest IPOs during Q4 were International Company for Water and Power Projects (ACWA POWER Co), which raised US$1.2 billion and was also the largest IPO in MENA for 2021, followed by Saudi Tadawul Group Holding Company which raised US$1 billion. Other IPOs on the Tadawul during this period, such as Arabian Contracting Services Company, Nayifat Finance Company, Almunajem Foods Company, Al Hasoob Trading Co. and Group Five Pipe Saudi Ltd., raised a total of US$1 billion in proceeds.

Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, says: “While the extent to which the MENA region’s capital markets have rebounded is to be welcomed, the mid-to-long-term outlook remains somewhat uncertain, particularly in the context of rising interest rates, high inflation and global geopolitical tensions. However, when we consider that a great number of state-owned entities have announced their listing plans, and recent MENA listings have been so heavily oversubscribed, we are quite clearly moving through a period of high demand and strong investor sentiment. Key question remains as to whether there is sufficient liquidity in the regional markets to cover the expected pipeline of large government backed IPOs in the near term.”

He continued, “Given the mixed picture, MENA IPO candidates must focus on careful preparation to ensure they are able to tap available IPO windows whilst continuing to carefully assess the environment to ensure they can adapt to quickly changing regulations, fast-moving market dynamics, and the regulatory shift towards ESG reporting.”