Taking stock

Equity markets are still far from regaining the momentum that prevailed prior to the collapse of Lehman Brothers and the onset of the global financial crisis. In the Arab world, however, and in the Gulf in particular, there is some sanguinity that the inertia that has characterised markets for the past four years may be wearing off from an increase in initial public offerings in the region.

Globally the value of 795 IPOs reached $123.5bn last year, 27 percent lower than 2011 and the lowest since 2009, according to Dealogic. Facebook’s $16bn deal was 2012’s largest IPO and accounted for thirteen percent of volume. In the Middle East, IPOs raised about $2bn in 2012, more than double that of 2011 where listings recorded $843.9m, according to a survey by Ernst & Young. In the fourth quarter of last year, three listings raised $339.8m, compared with $226.1m in the same period in 2011.

“Drawing comparisons over the last two years we have noticed a steady climb in the amount of funds being raised by IPOs possibly hinting that markets are inching towards better results,” says Phil Gandier, Ernst & Young’s MENA Head of Transaction Advisory Services.

Saudi Arabia, which has the largest economy in the Middle East, led the country standings in 2012, raising $1.4bn from seven offerings, followed by the UAE with $277m, and Oman with $264.4m. In North Africa, Morocco and Tunisia were the only countries that also had listings.

Globally during the fourth quarter, US markets raised $7.3bn (29 IPOs), narrowing the lead on the Asian markets, which raised $8.8bn (59 IPOs). European exchanges also saw something of a return to form, with deal value reaching $7bn (20 IPOs). But overall the number of deals fell 46 percent from 255 deals in the final quarter of 2011 to 136 deals.

“The outlook for 2013 will be to a great extent influenced by investor sentiments, against the backdrop of regional developments. We are confident that Saudi Arabia and the UAE will continue to be the regional hubs of IPO activity for investors in 2013,” Gandier says.

It’s too early to gauge how the markets in Saudi and the UAE will pan out this year or foretell the quantity of share listings and receptiveness of investors. In December, Al Habtoor Group, controlled by billionaire Khalaf Al Habtoor, a scion of one of Dubai’s largest merchant family-run businesses unexpectedly postponed a planned share sale scheduled for this year. That would have been the largest deal to hit the market in Dubai, which hasn’t seen any listings since mid-2008 when Drake & Scull went public.

Another family-run firm, Daman Investments, also pulled the plug on recent plans to list. Daman, established in 1998, was initially planning to hold its IPO before the end of 2012. That will not happen anytime soon — the Dubai Financial Market is down more than 70 percent from its peak in 2008.

“I don’t think the market environment is conducive, liquidity is not there, the appetite is not there and investor sentiment is not there generally,” Daman CEO Shehab Gargash told Arabian Business last year. “We are on track and are about to begin phase two of our capital raise which will be at a premium over phase one,” he said.

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