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UAE and Saudi ‘bright spots’ in challenging global IPO market

The PIF has stakes in 22 listed companies, including Saudi Aramco Reuters/Ahmed Yosri
Luberef will sell nearly 30 percent of the company's issued share capital
  • Dubai Electricity and Water Authority raised over $6bn
  • ADC raised $99.9m when listed on Abu Dhabi Securities Exchange 
  • Saudi Home Loans Company listing oversubscribed by 50 times

The UAE and Saudi Arabia bucked the global downturn in initial public offering (IPO) activity in the first half of 2022.

According to the EY MENA IPO Eye report, both countries – and the wider MENA region – remain a “bright spot in a challenging market”.

It witnessed a 500 percent year-on-year increase in the number of companies listing during the first six months of 2022, with 24 IPOs raising $13.5 billion – an increase of 2,952 percent in value – when compared to the same period in 2021.

During the second quarter of 2022, MENA saw nine IPOs raise about $9 billion. Although the number of IPOs decreased by 40 percent when compared with Q1 2022, the funds raised increased by 133 percent.

Globally, the picture is far more subdued: 630 IPOs raised $95.4 billion during H1, a significant drop of 46 percent of offerings, with the proceeds raised down 58 percent compared to H1 2021. 

Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance led to the postponement of many global IPOs during the first half of 2022, EY said.

Brad Watson, EY MENA strategy and transactions leader, said: “MENA IPO activity continues to defy global trends. The number and value of deals in the second quarter of this year confirms that investors still have an appetite for growth, yield and diversification. 

“Several MENA listings from a range of sectors were oversubscribed, which is encouraging for companies looking to list during the second half of this year.”

In the UAE, Dubai Electricity and Water Authority raised over $6 billion, becoming the biggest IPO in EMEA since 2019 and the largest IPO to date in the UAE. 

The order book was oversubscribed by 37 times. Plastic maker Borouge plc, the second largest IPO during H1, raised $2 billion, with an aggregate oversubscription of almost 42 times. 

Real estate developer TECOM Group also raised $454 million and saw an oversubscription level of more than 21 times.

During H1, ADC Acquisition Corp became the first special purpose acquisition company (SPAC) to ever be listed in the MENA region, raising $99.9 million through its listing on the Abu Dhabi Securities Exchange (ADX). 

In Saudi Arabia, the Saudi Home Loans Company was listed on the Tadawul during Q2. It raised $160 million, with the book being oversubscribed by 50 times. 

Saudi developer Retal Urban Development Company raised $384 million, with its institutional order book being 62 times oversubscribed.

Saudi’s parallel market Nomu also witnessed three IPOs during Q2, which raised $40.8 million in total: Arabian Food & Dairy Factories Company, real estate developers Ladun Investment Company and Amwj International Company.

Gregory Hughes, EY MENA IPO and transaction diligence leader, said: “The second quarter of 2022 continued the momentum of the first, with Saudi Arabia and the UAE leading IPO activity in the MENA region. 

“Despite concern from investors regarding the risk of a global recession, there remains a healthy pipeline of IPO candidates from Saudi and the UAE, as well as quieter IPO markets such as Oman, Qatar, and Kuwait, looking to come to market in the future.”

He added that businesses are focusing even more on the impact of the changing regulatory environment, particularly around environment, social and governance (ESG) requirements. These will continue to be a key theme for investors and potential candidates. 

Elsewhere, Ali Alghanim and Sons Automotive Company raised new capital of $323 million through a private placement before listing on Boursa Kuwait. The raise was oversubscribed approximately 11 times.

On the ADX, GFH Financial Group completed its fourth regional listing, with its shares already listed on the Bahrain Bourse, Boursa Kuwait and the Dubai Financial Market. 

In April, the ADX rebranded its Second Market into the Growth Market, with the Invictus Investment Company becoming the 13th company to be listed during Q2.

Globally, Q2 saw a dramatic slowdown in IPO activity due to increasing market volatility, which led to the postponement of many flotations. While most major markets experienced a fall in overall IPO activity, the Middle East and India bucked the trend.

Heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance all led to significant drop in IPO activity from a record year in 2021. 

Global activity almost halved in H1 when compared to H1 2021, with the Americas market seeing the biggest decline.