GCC IPOs Surge Despite Global Dip: 2024 Insights
The GCC's IPO market has been a standout amid global declines, with Saudi Arabia and UAE at the forefront of a robust 2024 start.
Published May 15, 2024 - 00:05am
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Mubasher: Initial public offerings (IPO) in the GCC have raised $931 million in the first quarter (Q1) of 2024, a 73% year-on-year (YoY) plunge from $3.50 billion in the comparative period of 2023, according to a report by Kuwait Financial Centre (Markaz).
The region saw nine offerings in Q1-24, versus 12 offerings in Q1-23, the report said. Saudi Arabia led the region in the three-month period that ended on 31 March 2024, raising total proceeds of $503 million from eight offerings, a 594% YoY surge from Q1-23, constituting 54% of the region's total.
On the other hand, the value of IPO proceeds in the UAE dropped 87% YoY to $429 million in Q1-24, which is still making up 46% of the region's total during the period.
In Q1-24, the transportation sector led the way, representing nearly 46% of total proceeds. This was largely driven by Dubai-based Parkin Company's IPO, which raised $429 million, marking the largest offering of the period. Following closely, the food and beverages sector raised over $314 million, accounting for 34% of total GCC IPO proceeds. IPOs from the pharmaceutical, healthcare equipment, and materials sectors constituted 14%, 2%, and 1% respectively. Other IPOs included companies from consumer Services, financial services, commercial services, and technology sectors, among others.
Saudi Arabia dominated IPO proceeds in the GCC during the January-March period, contributing 54% of the total, with $445 million listed on the Saudi Exchange's (Tadawul) main market and $57 million on the Nomu-Parallel market. Meanwhile, the UAE markets accounted for 46% of total proceeds in Q1-2024, with $429 million listed on Dubai's exchange (DFM).
PwC's latest IPO+ Watch report highlighted the Saudi Stock Exchange's emergence as a dominant force in Gulf Cooperation Council equity market launches activity, hosting the majority during the quarter, underscoring the region's attractiveness to investors seeking dynamic opportunities. 'Tadawul is reported to remain the most active exchange in the GCC with all but one IPOs taking place on either Tadawul main market or the Nomu parallel market,' the report stated. On the primary market, three IPOs garnered a combined total of $667 million, while on the secondary market, six offerings raised $57 million in total.
Middle East IPOs' positive aftermarket performance continued into 2024, as most Q1 2024 IPOs saw significant post-IPO gains, revealed PwC Middle East's latest IPO+ Watch. Additionally, record-breaking demand for Dubai Parking, which set a new record for subscription levels at the Dubai Financial Market, being oversubscribed by 165 times. Muhammad Hassan, capital markets leader at PwC Middle East, expressed optimism, citing Parkin's oversubscription and double-digit post-IPO gains as indicators of sustained positive momentum.
The offerings landscape in the Middle East during the first three months of this year was characterized by activity across various sectors, showcasing a diverse range of investment opportunities. From consumer markets with companies like Parkin Co. and Modern Mills for Food Products Co., to health industries represented by Avalon Pharma, and technology, media, and telecommunications with MBC Group Co., the IPO wave has touched multiple sectors. Smaller-scale market debuts were also observed in the financial services, industrials, manufacturing, and automobile sectors.
'We expect the privatization agenda across the GCC, combined with the ambition of private family businesses to go public, will continue to drive issuance supporting positive momentum in GCC IPO activity in 2024,' Muhammad Hassan added. Looking ahead, the report anticipated continued strength in the public flotation landscape for the remainder of 2024, buoyed by a robust pipeline. Private sector companies seeking liquidity and access to capital are expected to drive much of this activity, with Saudi Arabia and the UAE leading the charge. Nevertheless, there's growing momentum in markets like Oman and Qatar, signaling a broader regional expansion of IPO activity.
The significant drop in IPO proceeds in the GCC during the first quarter of 2024 is reflective of a changing economic landscape, where fluctuations in capital markets are not uncommon. While overall numbers were down from 2023, the impressive growth in the number of offerings in Saudi Arabia exemplifies a positive upward trend and investor confidence within the kingdom's economy. The diverse sectoral participation indicates an expanding financial canvas, one that is embracing a wide spectrum of industries.
Amidst the varying performance of regional markets, economic experts continue to monitor several factors driving the IPO trends. Economic reforms, favorable government policies, and increasing entrepreneurial activities are among the key drivers. Moreover, the oil-rich region's ongoing shift to reduce dependency on hydrocarbons and diversify the economy has been playing a pivotal role in shaping the investment scenario, including the IPO market.
The surge in Tadawul's market activity is a testament to Saudi Arabia's Vision 2030 objectives, which include financial sector development as a cornerstone. The kingdom's efforts to enhance its capital markets, culminate in regulatory improvements, and foster a business-friendly environment have been pivotal. This momentum is expected to continue, with the kingdom's main market projected to attract more large-cap entities looking to go public.
Notwithstanding the heightened activity in specific GCC markets, there remain challenges that need to be addressed. Market volatility, global economic pressures, and regional geopolitical dynamics are factors that may impact investor sentiment and the valuation of assets. Analysts recommend that companies contemplating IPOs conduct thorough market assessments and maintain financial agility to capitalize on the appropriate window for going public.
As the Gulf Cooperation Council continues to enhance its legal and regulatory frameworks, more diverse and sophisticated financial instruments are anticipated to emerge, potentially fueling further growth in the capital markets. The infrastructure development in anticipation of major global events such as Expo 2020 Dubai and the FIFA World Cup Qatar 2022, although now behind us, have left a legacy of improved mechanisms for capital raising and investment diversification, which are likely to benefit future market participants.
Industry observers also point to the growing role of technology and digital transformation in the region's IPO markets. Advancements in fintech and the rise of digital securities offerings have the potential to reshape the IPO processes and broaden investor reach. This technological integration within financial architectures could lead to more streamlined, transparent, and accessible public offerings—an aspect that is particularly appealing to the younger, tech-savvy demographic within the region.
In conclusion, the first quarter of 2024 has painted a mixed picture for GCC IPO markets. Despite a decline in total proceeds, there are reasons for optimism, including the performance of individual locales such as Saudi Arabia's Tadawul. With continued socioeconomic reforms, technological advancements, and a progressive regulatory environment, the GCC region remains a significant contender in the global capital market arena. Investors and businesses alike will be watching closely to see if this momentum can be maintained throughout the rest of the year and beyond.