The Middle East and North Africa (MENA) region saw three IPOs raise total proceeds of $294.8 million during the first quarter of 2021, a 64 percent drop compared with the same period in 2020.
The three issuances were in the transport, power and utilities and real estate sectors, according to the EY MENA IPO Eye Q1 2021 report.
Despite expectations for an increase in activity after an uptick in issuances in Q4 2020 – which saw four IPOs and $925 million in proceeds – the IPO market in the MENA region had a slow start to 2021.
Continued uncertainty around the impact of the ongoing pandemic has affected the MENA markets even as oil prices have continued their recovery and vaccination roll outs have been gaining speed across the region, EY said.
Globally, Q1 was the best-performing first quarter by deal number and proceeds in the last 20 years, with 430 IPOs and $105.6 billion in proceeds, up 271 percent when compared to the same quarter last year.
The surge in momentum can be attributed to the ample liquidity in the financial systems, the accelerated growth of technology and new economy companies propelled by the pandemic, speculative and opportunistic transactions and platforms that have made retail investing more accessible to the general public and young generations.
Matthew Benson, EY MENA strategy and transactions leader, said: “The MENA region’s IPO market was off to a slower than expected start in 2021, despite expectations for an increase in IPO activity… we expect IPO activity to bounce back over the coming months while economic conditions in the region continue to improve, aided by the accelerated vaccine rollouts and the possibility of reaching herd immunity against Covid-19.”
The Saudi Stock Exchange (Tadawul) continued to be the MENA region’s top listing venue in Q1, with two listings totalling $281.6 million, which represented 96 percent of the total amount raised.
The previous year, it had four listings totalling $1.45 billion, representing 78 percent of the total amount raised by MENA IPO candidates in 2020.
Tadawul’s own IPO also continued to gain traction, as the exchange announced its conversion into a holding company with four subsidiaries as preparation for its IPO. It is now said to be in the process of selecting advisors for the transaction, with the IPO expected later this year.
Gregory Hughes, EY MENA IPO and transaction diligence leader, said: “As we look at the remainder of 2021 and beyond, there are many reasons to be optimistic about the upcoming quarters ahead. A strong IPO pipeline in key MENA markets across sectors, coupled with various government initiatives to deepen the capital markets, particularly in Saudi Arabia and the UAE, should help bring more IPOs to markets in the region.
“Additionally, the underlying economic factors within the region remain strong and we anticipate that future IPO activity in the MENA region will reflect the overall positive signs that we are beginning to see.”
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