Muscat: The Mena region witnessed a 500 per cent year-on-year increase in the number of companies listing during the first half of 2022 with 24 IPOs raising proceeds of $13.5 billion – an increase of 2,952 per cent in value when compared to the same period in 2021, according to a new report.
“During the second quarter of 2022, the Middle East and North Africa (Mena) initial public offering (IPO) markets saw nine IPOs raise approximately $9 billion in proceeds. Although the number of IPOs decreased by 40 per cent when compared with the first quarter of 2022, the proceeds raised increased by 133 per cent,” according to the latest EY Mena IPO Eye report.
Globally, 630 IPOs raised $95.4 billion in proceeds during the first half (H1) 2022, which is a significant drop of 46 per cent in the number of IPOs and 58 per cent in the proceeds raised, as 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,” the report added.
“Mena IPO activity continues to defy global trends and remains a bright spot in a challenging market. 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,” Brad Watson, EY Mena Strategy and Transactions Leader, said.
“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,” he added.
UAE IPO listing
In the United Arab Emirates (UAE), the Dubai Electricity and Water Authority (DEWA) raised over $6 billion, becoming the biggest IPO in Europe, the Middle East and Africa (EMEA) since 2019 and the largest IPO to date in the UAE. The order book was oversubscribed by 37 times.
Borouge, the second-largest IPO during H1 2022, raised $2 billion with an aggregate over-subscription of almost 42 times. TECOM Group raised $454 million and saw an over-subscription level of more than 21 times.
ADC Acquisition Corp became the first special purpose acquisition company (SPAC) to ever be listed in the MENA region, raising $99.9 million with its listing on the Abu Dhabi Securities Exchange (ADX). ADC was established by ADQ through its Alpha Oryx special purpose vehicle and Chimera Investment as a SPAC to identify and acquire one or more businesses.
In Saudi Arabia, the Saudi Home Loans Company was listed on the Tadawul during the second quarter (Q2) of 2022 and raised $160 million, with the book being oversubscribed by 50 times. Retal Urban Development Company raised $384 million with its institutional order book being 62 times oversubscribed.
The Nomu-Parallel Market witnessed three IPOs during Q2 2022 which raised $40.8 million in total. The proceeds came from the listings of the Arabian Food & Dairy Factories Company, Ladun Investment Company, and Amwj International Company.
There were also six direct listings reported in Q2 2022, with a total of 12 announced during the first half of the year.
Three direct listings took place on the Nomu-Parallel Market during Q2 2022. They were Naseej for Communication and Information Technology Company, Aqaseem Factory for Chemicals and Plastics Company and National Environmental Recycling Company.
Elsewhere, Ali Alghanim and Sons Automotive Company raised new capital of $323 million through a private placement before listing on Boursa Kuwait. The private placement was oversubscribed approximately 11 times.
On the ADX, GFH Financial Group BSC completed its fourth regional listing, with its shares already listed on the Bahrain Bourse, Boursa Kuwait and the Dubai Financial Market (DFM). In April 2022, the ADX rebranded its Second Market into the Growth Market, with the Invictus Investment Company becoming the thirteenth company to be listed on the Growth Market during Q2 2022.
Gregory Hughes, EY Mena IPO and Transaction Diligence Leader, said: “The second quarter of 2022 continued the momentum of the first quarter, 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 KSA and the UAE, as well as quieter IPO markets such as Oman, Qatar, and Kuwait, looking to come to market in the future.”
“As part of their IPO readiness assessments, businesses are focusing even more on the impact of the changing regulatory environment, particularly around the environment, social and governance (ESG) requirements. ESG will continue to be a key theme for investors and potential candidates. As the global climate continues to change and the constraint on energy supplies increases, companies that have embedded ESG into their core business values and operations should attract more investors and higher valuations,” he added.
Global IPO market
Globally, Q2 2022 saw a dramatic slowdown in IPO activity due to increasing market volatility, which led to the postponement of many IPOs. While most major markets experienced a fall in overall IPO activity, the Middle East and India both experienced a strong quarter.
Overall, the heightened volatility caused by geopolitical tensions and macroeconomic factors, declining valuation and poor post-IPO share price performance all led to a significant drop in IPO activity from a record year in 2021. Global activity almost halved in H1 2022 when compared to H1 2021, with the Americas market seeing the biggest decline. However, the Asia-Pacific markets performed relatively better and benefitted from the two largest global IPOs in the year to date.