IPO activity in the Middle East and North Africa (MENA) region continued to gather momentum in Q2 2023, with a total of 13 initial public offerings (IPOs) raising $1.8bn in proceeds, according to the EY MENA IPO Eye Q2 2023 report. This represents a 44% increase in the number of listings from Q1 2023, but an 80% drop in proceeds.
The report indicated that the growth in Q2 2023 was driven predominately by the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE). KSA dominated the region’s IPO activity in terms of the number of listings, with four companies going public on the Tadawul main market and seven on the Tadawul (Nomu) parallel market.
Jamjoom Pharmaceuticals Factory Company raised $336m, the highest raise on the Tadawul for the quarter, followed by First Milling Company SJSC which raised $266.4m. Both companies offered a free float of 30% of their share capital and were oversubscribed.
In the UAE, the Abu Dhabi Securities Exchange (ADX) completed its largest IPO of the quarter with ADNOC L&S raising $769.5m. The IPO saw the largest demand globally for a transaction so far in 2023, with an oversubscription level of 163x in aggregate – the highest oversubscription for a UAE book-build IPO.
On the Dubai Financial Market (DFM), Al Ansari Financial Services PJSC was the UAE’s first family-owned company to be listed, raising $210.4m in proceeds.
Brad Watson, EY MENA Strategy and Transactions Leader said: “The second quarter of 2023 confirmed that MENA IPOs are not experiencing the downward trend witnessed globally. 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.”
Overall, in H1 2023 the MENA IPO market registered a total of 23 IPOs (4% year-on-year decrease), all of which were in the GCC with total proceeds of $5.2bn.
While the general EMEIA region continues to see a significant contraction in IPO values, the MENA region has a promising pipeline for the rest of the year, particularly from KSA. So far, 23 Saudi companies have announced their listing plans on the Tadawul for H2 2023. Further afield, two companies in Egypt intend to list, indicating a strong pipeline of IPOs to come in the remainder of the year.
Egypt’s EGX30 was the Middle East’s best performer and finished H1 2023 with a 21% gain (7.6% for the quarter). The DFM closed H1 2023 strongly with a gain of 13.7%, making it the top-performing market in the GCC. This was followed by the Tadawul, which closed H1 2023 at an 8.7% gain. ADX was the worst-performing market for the quarter closing at a 6.5% decline in performance for H1 2023, partially driven by the decline inInternational Holding Company’s (IHC) share performance in 2023, which accounts for the majority proportion of the index.
Gregory Hughes, EY MENA IPO and Transaction Diligence Leader said: “The MENA IPO pipeline for H2 2023 and 2024 remains very healthy with several IPOs already announced in KSA and multiple processes ongoing across the broader region, with further transactions planned in the UAE, Oman, Qatar, and Kuwait. We see planned IPO activity across different sectors and from a combination of family businesses, state-backed enterprises and private equity stakeholders. MENA has been a bright spot in the much more subdued global IPO market, and we expect this to continue in the future, especially with international businesses also exploring listings in this region.”
Impact of Oil Prices on Global Economy
EY analysis shows that the global economic picture in H1 2023 was impacted by volatility in OPEC and Brent crude prices, which rose in January and February 2023 before falling sharply around mid-March 2023. The rise in January was due to the stronger-than-expected growth in China’s economy, which boosted demand for oil. The fall in March led to concerns about a global recession and expectations of higher interest rates.
Oil prices rebounded in April 2023 as the financial market stabilized and expectations of higher interest rates eased. OPEC+ announced production cuts in early April, which provided further support to prices. Crude oil prices witnessed relatively lesser volatility in June with prices settling at lower levels of $71/bbl to US$77/bbl as concerns about the global economy weighed on demand.
However, the report indicated that further production cuts by OPEC+ and KSA are expected to support prices in the coming months.