The number of initial public offerings (IPO) is expected to increase in the final quarter of 2020 after coronavirus nearly brought the sector to a grinding halt over the last six months.
From April to the end of September, just one IPO was seen in the Middle East and North Africa as the impact of the pandemic forced companies to delay plans to go public.
In fact, no listings were announced in Q2, which marked the first time in more than 10 years that the MENA region had a quarter close without a listing.
In Q3, the region witnessed one IPO valued at $115.9 million, according to the EY MENA IPO Eye report.
The IPO of Amlak International for Real Estate Finance, headquartered in Saudi Arabia, was oversubscribed 26.9 times.
Prior to the pandemic, the year had initially begun promisingly with four deals – three of which took place in Saudi Arabia, raising $865 million in total.
Matthew Benson, MENA strategy and transactions leader, EY, said:“The adverse impact of the Covid-19 pandemic outbreak, as well as a number of macroeconomic and geopolitical factors continues to be felt across the MENA region, resulting in relatively subdued IPO activity.
“Despite this impact, the IPO of Amlak International for Real Estate Finance represents a positive signal for markets, particularly in light of the fact that roadshows were held virtually, as a result of social distancing measures.”
He added: “In the remainder of the year we are likely to see increased IPO activity in the region, as lockdown restrictions continue to ease. We expect listings to pick up in Q4, with Saudi grocery chain operator BinDawood Holding having already led the way with their IPO on Tadawul.”
Across the GCC, markets have remained impacted by the pandemic and market volatility. With Amlak International for Real Estate Finance representing the only listing, proceeds have fallen 39 percent when compared to Q3 2019.
Gregory Hughes, MENA IPO leader, EY, said: “At the beginning of 2020, as many as 16 new issuances were expected to hit the regional markets. The fact that Amlak International represented the only IPO of Q3 shows that even as restrictions ease and we begin to emerge from the economic impact of the pandemic, IPO volumes and proceeds in the MENA region remain subdued.
“Despite this, there are a number of IPOs in the pipeline across the United Arab Emirates, Saudi Arabia, Oman, Kuwait and Qatar, which to some extent bodes well for Q4 and is a positive indicator as we head into 2021.”
In Saudi Arabia, the Tadawul launched its derivatives market in Q3, which officials believe will enhance the depth of the kingdom’s capital markets. This forms part of a wider strategy to attract more foreign investors to the country, and more products are expected to be launched next year.
Saudi Arabia’s Capital Market Authority (CMA) also approved the first direct listing on the Nomu Parallel Market of Saudi White Cement Company.
In the UAE, the government announced that in Q3 it will merge its Insurance Authority with the Securities and Commodities Authority to form a single regulator that will oversee the non-bank financial sector, including the capital markets, futures exchanges, and insurance sector, to help streamline the regulatory process for firms in the sector.
Further decrees were announced earlier this month relating to the merging of the Insurance Authority with the UAE’s Central Bank and transfer of power from SCA to the local stock exchanges.
Local stock exchanges in the UAE are also gearing up for increased activity in the coming months, with Nasdaq Dubai announcing that it will be launching a Growth Market in early 2021 for SMEs.
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