IPO activity in MENA on the rise

Published October 17th, 2011 - 02:39 GMT
Investors in the region are still uncertain of what fair value is due to the follow-on effect of the European Union debt crisis and the slowdown in the United States
Investors in the region are still uncertain of what fair value is due to the follow-on effect of the European Union debt crisis and the slowdown in the United States

The regional capital markets raised $218.9 million through the initial public offering (IPO) during the third quarter of 2011, up by 23.6% from the $177.04 million raised in the same period last year, but down 39 percent from the $335.05 million raised in the previous quarter.

This was revealed by Ernst & Young yesterday, in its IPO report during the third quarter of 2011, in the Middle East and North African (MENA) region. The sole country in the region to witness any IPO activity in the third quarter was Saudi Arabia with two listings on the Tadawul.

United Wire Factories of Saudi Arabia ($88.3 million) was listed in August 2011 and Hail Cement Company ($130.5 million) was listed in September 2011. Phil Gandier, MENA dead of Transaction Advisory Services, Ernst & Young, says: "The listings in Saudi are an exception to the lack of IPO activity in the key MENA capital markets.

Investors in the region are still uncertain of what fair value is due to the follow-on effect of the European Union debt crisis and the slowdown in the United States. This is increasingly becoming true for almost all asset classes, including equity and IPO pricing."

"Companies have had to postpone going to market since 2009 and will continue to do so this year. Investors are again looking for safety as uncertainty is set to continue in the fourth quarter. Predictions of listings, even in the low single digits, may not necessarily hold for the next quarter, however the pipeline of companies waiting for their IPOs is building up," Phil added. Global IPO activity Global IPO activity has fallen sharply in the third quarter.

So far this quarter, a total of 284 deals raised $28.5 billion, this compares to 383 IPOs worth $65.6 billion in the second quarter (a 26 percent decrease in number and 57 percent drop in capital raised). Whereas in the third quarter of 2010, there was 302 IPOs which raised $52.5 billion (a six percent drop in number and a 46 percent decrease in capital raised compared to the third quarter of 2011). This quarter globally, only three deals raised over $1 billion. Average deal size decreased in many markets in the third quarter compared to the second this year.

The global average deal size was $100 million in the third quarter, compared to the second quarter ($171 million). Asia dominates Asian issuers continue to dominate IPO activity in the third quarter with 138 deals, which raised $13.5 billion altogether (47 percent of global funds raised). However, this is the lowest level of capital raised by Asian issuers since the second quarter of 2009 ($3 billion in 44 deals). European issuers completed 69 deals, which raised $8.8 billion (31 percent of global funds raised), this was significantly less than the second quarter of 2011($21.7 billion in 96 deals).

The third quarter activity remains higher than the first quarter with $2.4 billion raised 52 deals. North American issuers raised $4.5 billion in 41 deals (16 percent of global funds raised) compared to $11.6 billion raised with 55 deals in the second quarter (18 percent). Future global outlook "Asia will continue to lead global IPO activity as domestic and foreign IPO pipeline builds. As soon as the market stabilises, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally.

The dominant trend in Europe's IPO markets will continue to be state-owned enterprises. We have seen recently examples of European countries taking SOEs public. Governments need to act quickly to help lower market volatility and restore investor confidence for the IPO market to recover," concludes Pinelli.


© Muscat Media Group

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