Mideast IPO markets take a breather
2023 is shaping up to be the year of the pause for the region’s capital markets.
“We jokingly say this is the year of the pause – the year of building a pipeline for 2024.”
The investment banker is sipping an iced chai latte at a café in the Dubai International Finance Centre, one of the Middle East’s many and growing international financial hubs, and ruminating on the past, present and immediate future of the region’s capital markets.
“Last year there was a rush of IPOs here, all connected, all in a sequence,” he says. “At first, everyone was happy – it was a clear sign the region was taking off.”
Much of the action took place early on: 24 IPOs were completed in the first half of 2022, together worth $13.2 billion, according to Dealogic. In comparison, there were 22 IPOs and $5.3 billion in the first six months of 2023.
Investor appetite for shares issued by unlisted firms in one of the world’s few robust regions rose for most of the year. Dubai utility Dewa’s $6.1 billion April 2022 was 37 times over-subscribed. That number rises to 42 times for chemicals group Borouge’s $2 billion sale in May, 49 times for toll-road operator Salik’s $1 billion IPO in September, and 59 times for Saudi utility Marafiq’s $897 million share sale in October.
Having taken the break, bankers are gearing up for – they hope – another rush of listings
When Saudi Aramco Base Oil, better known as Luberef, raised $1.32 billion in December, the institutional portion of its sale was ‘only’ 29.5 times subscribed. Was it a sign that appetite was on the wane? The banker believes so.
“There was a lot to digest in that nine-month period," they say. "Investors were fatigued. Taking a pause wasn’t the worst thing to do.”
And taking a breather is what the wise owls who plan the listing calendar, particularly in the UAE and Saudi Arabia, have decided to do. Of the 20 largest IPOs since the start of 2022, just four took place this year, according to Dealogic. The largest two were completed by divisions of Abu Dhabi oil giant Adnoc, a regular visitor to the capital markets.
And now, having taken the break, bankers are gearing up for – they hope – another rush of listings. One tips five to 10 big Dubai share sales to take place in the next 18 months. Government and regulators tend to keep their cards close to their chest, but a name touted as a listing candidate is Dubai Taxi Corporation, which should raise upward of $1 billion.
Riyadh-based MBC Group, the region’s biggest broadcaster, is exploring an IPO in the Saudi capital; HSBC and JPMorgan are understood to be working on the planned offering.
One of the big shifts in 2024 could be a series of listings by high-tech firms, some with few connections to either the state or well-connected families.
In March this year, Presight AI, a data analytics firm owned by Abu Dhabi’s G42, raised $496 million. G42, which specialises in artificial intelligence and cloud computing, is mulling at least six more IPOs.
Bankers point to other private-sector prospects, including Dubizzle, which runs classified websites popular with regional expats, and managed cloud kitchen platform Kitopi. Both are owned by families with roots outside the traditional heart of the Middle East.
“So, it turned out that 2023 was a preparation for 2024,” the chai latte-sipping investment banker says. “I don’t think it’s by design, but it’s turning out that way.”