Global IPOs continue to decline in 4Q 2018

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JEDDAH/DUBAI — In 2018, the MENA region raised $2,946.2m through 26 IPOs, according to the latest EY MENA IPO Eye report. Compared to 2017, IPO value saw a decrease year-on-year by 24.6% and activity declined by 23.5%.

Globally, IPO activity continued to slowdown in Q4 2018, with 326 IPOs raising $53.7b, marking a decrease of 34% and 10% respectively, compared to Q4 2017.

Phil Gandier, MENA Transactions Leader, EY, said:

“IPO activity in the MENA region saw a decline in 2018 as several entities across the region deferred their plans for IPOs. This can be attributed to various reasons including challenging economic conditions affecting regional businesses and global trade concerns. Regulatory changes and a rising interest rate environment over the past year have also contributed to decreased activity. However, despite the slowdown, 26 IPOs were recorded in the region across sectors over the past year, indicating an appetite for more diversified activity.”

In the GCC, 18 deals were recorded in 2018 with a total value of $2,564.6m. Saudi Arabia led IPO activity in 2018 with 12 IPOs worth $1,472.4m.

In the fourth quarter of 2018, the MENA region witnessed seven IPOs, of which one was a REIT listing, for a total deal value of $1,085.1m.

Saudi Arabia witnessed two IPOs in Q4 2018, including Alkhabeer REIT which raised $64.1m and the National Company for Learning & Education which raised $66.7m. Tadawul is working on several initiatives including launching stock index futures (planned for Q1 2019) and launching a special incentive program for local companies to list.

The country is also planning the privatization of more than 20 companies in 2019 in sectors such as water, agriculture, energy, and sports. To help increase transparency, the government plans to retain minority interests in the businesses and undertake IPOs and other transactions for a certain percentage of each asset.

The Bahrain Stock Exchange saw the IPO of port operator APM Terminals in Q4 2018 raise $32m. The IPO was oversubscribed by 5.4 times, making it the most successful IPO in Bahrain in over a decade.

Nasdaq Dubai plans to launch futures trading on the MSCI United Arab Emirates equity index in 2019 to provide investors a new avenue to gain exposure to UAE companies.

In Kuwait, S&P has issued a statement that the country will be added to the S&P Dow Jones Global Benchmark Indices with an emerging market classification in 2019. The Kuwait Stock Exchange is currently awaiting MSCI’s decision in 2019 on upgrading the exchange to emerging market status from the current frontier market status.

Gregory Hughes, MENA IPO Leader, EY, said:

“While the interest from several companies across the MENA region to execute an IPO is high, especially for those looking to access international investors and exchanges, many plans have been delayed for numerous reasons, including underperformance of businesses due to the challenging economic environment, global market volatility, and the time it takes to adapt to public company listing requirements. We continue to work with many companies in preparation for transactions in 2019 and beyond, particularly from the United Arab Emirates, Saudi Arabia, and Egypt.”

In the wider MENA region, Egypt, Morocco, and Algeria recorded one deal each amounting to a total value of $176.7m. The IPO of Sarwa Capital on the Egyptian Stock Exchange raised $123.2m during Q4 2018. The government of Egypt delayed the sell-off of a 4.5% stake in the state-owned Eastern Tobacco Company owing to market volatility. Many private IPOs tentatively planned for the quarter were also pushed to 2019 citing market volatility.

In Morocco, the IPO of Mutandis SCA raised $44.0m in Q4, making it the second IPO in 2018 on the Casablanca Stock Exchange.

The Algiers Stock Exchange witnessed the first SME to introduce its capital on the stock market, with the IPO of AOM Invest Spa raising $9.5m during Q4 2018. The Algiers Stock Exchange has opened the SME segment as part of the financial market’s modernization project, with the objective of increasing its contribution to the mobilization of savings and the financing of the economy. — SG


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