Finance

Mena IPOs drop but analysts still bullish for 2024

November 7, 2023, 1:12 PM

A stock investor centre at Arab National Bank in Riyadh. The Saudi exchange accounted for five of the six Mena IPOs in Q3

Just six listings in third quarter
IPOs raised $523m, a drop of 66%
All this year’s listings in GCC

Listings on Middle East and North African stock markets slowed during the third quarter, but analysts remain upbeat for 2024 despite concerns over the Israel-Gaza conflict.

There were six initial public offerings (IPOs) in Q3, raising $523 million in total. This is a 14 percent drop in volume and a 66 percent slump in proceeds compared to a year earlier.

There have been 29 IPOs so far this year, according to EY’s Mena IPO Eye Q3 report. Total proceeds stand at $5.8 billion. This is down 6 percent in volume and 61 percent in funds raised year on year. All the listings are in the GCC.

IPOs worldwide fell in volume and value in Q3, but by smaller proportions than the Mena figures. There were 350 global listings in the quarter (down 6 percent), raising more than $38 billion (down 27 percent).

Gregory Hughes, EY Mena IPO and transaction diligence leader, said that despite the Q3 slowdown in Q3, he remained optimistic “the remainder of 2023 and 2024 will show a healthy number of IPOs based on current pipelines”.

He added: “However, we are facing a risk that the ongoing geopolitical challenges in the region will adversely impact investor sentiment.”

Brad Watson, EY Mena strategy and transactions leader, also pointed out that 21 of this year’s 29 IPOs ended Q3 with a higher share price since listing.

“IPOs remain driven by the dominant economies of Saudi and the UAE, which are pursuing their strategic agenda of increasing capital market activity on the local exchanges and stepping up efforts to attract foreign investment,” Watson said.

The Saudi stock exchange, Tadawul, reaffirmed its IPO dominance with five of the six listings in Q3, raising $330 million in total.

The fourth quarter kicked off with three Saudi listings in October. Another 27 companies have announced their intention to list on Tadawul.

Qatar Stock Exchange had the second-largest Mena IPO of Q3, with Meeza raising $193 million.

EY’s report also pointed to the growing importance of environmental, social and corporate governance (ESG) to investors, as the UAE prepares to host the Cop28 climate summit.

Exchanges in Dubai, Abu Dhabi and Egypt have all mandated their listed companies to report on ESG performance.

The Muscat bourse is encouraging voluntary ESG reporting for 2023, ahead of it becoming mandatory in 2024. Other exchanges, including Tadawul, have issued guidance on ESG reporting.