Middle East IPO train keeps rolling
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The Middle East’s boom in initial public offerings is not slowing down, with a new crop of companies — some announced as recently as this week — planning to go public soon.
Why it matters: This is in sharp contrast with the IPO window in the U.S. and Europe, both of which have been snapped shut for most of the year. That even forced the once-determined Instacart and others to push back listings.
The big picture: According to Rudy Saadi, Citigroup’s head of MENA Equity Capital Markets, the current blooming of new listings is a result of several factors:
- a historical under-investment in the region;
- governments’ desire to diversify their economies;
- regulatory changes welcoming foreign investors;
- U.S.-pegged (and thus more stable) currencies;
- strong GDP growth;
- and inflation lower than the US and Europe.
Saadi also points to payments company Network International’s decision to list in London in 2019 as the last sizable company in Dubai to list abroad. Since then, the emirate's regulators have made its exchange more attractive to local companies, as have Abu Dhabi and Saudi Arabia. By the numbers: Since the beginning of 2022, 45 companies have gone public on the region’s exchanges, raising $17.6 billion in proceeds, per Refinitiv data as of Nov. 24.
- This is up 62% from 2021's levels of IPO proceeds.
Between the lines: Much of the Middle East's current IPO wave has been to privatize state-owned companies and government related entities. The next phase is expected to come from large family-owned corporations looking to liquidate some of their ownership, Saadi tells Axios.
- He also expects some local tech companies to start going public.
- However, their current lack of profits as growth-stage companies means that even with support from regulators (some of which don’t allow unprofitable listings) they’ll need to work to be at least profitable on an EBITDA basis and get investors in the region to get more comfortable with their growth path and ability to deliver dividends in the long term.
Yes, but: All’s not been rosy.
- For example, most of the newly listed companies on Dubai’s stock exchange are now trading below the IPO price, as Bloomberg noted earlier this week.
The bottom line: “We are already in December… and we are still launching IPOs,” Saadi says. “It will not pause – you might see issuance at a slower pace [next year] – but it won’t stop.”
