Dubai — After witnessing strong activity throughout 2022, major GCC stock exchanges continued to be active with listing momentum in terms of IPO numbers in 2023, though issuance proceeds dropped despite the MSCI GCC gaining by 3.7 percent year-over-year on mixed performances from individual countries.
The total number of IPOs in the GCC slightly decreased to 46 issuances in 2023 from 48 in 2022, according to recent analysis by Kamco Invest. Proceeds for 2023 from GCC issuers fell by 54 percent to US$ 10.79 billion from US$ 23.38 billion in 2022, based on data from Bloomberg and stock exchanges.
While issuance numbers were driven by smaller-ticket IPOs, post-listing performance from larger companies was largely positive. Solid performances from these larger stocks were supported by clear signaling and IPO pitches about growth prospects, which drove robust price appreciation, or strong dividend yields (5 percent-6 percent).
The UAE repeated its performance with higher issuance proceeds; the Saudi Exchange dominated deals yet again. Saudi Arabia continued its leadership in IPO issuances from the region in 2023, with 35 out of the 46 GCC IPOs debuting on either the Nomu or Tadawul.
At A Glance GCC Stock Exchange Activity in 2023 * Major GCC stock exchanges continued to be active with listing momentum in terms of IPO numbers in 2023. * Despite the MSCI GCC gaining by 3.7% year-over-year, individual country performances were mixed. IPO Issuance Numbers and Proceeds * The total number of IPOs in the GCC slightly decreased to 46 issuances in 2023 from 48 in 2022. * Proceeds from GCC issuers fell by 54% to US$ 10.79 billion (Kamco Invest, Bloomberg data). Performance of Larger Companies * Larger companies showed solid post-listing performances. * Solid performances...were supported by clear signaling and IPO pitches about growth prospects. Saudi Arabia and UAE Leading the Pack * Saudi Arabia led in IPO issuances with 35 out of 46 IPOs. * The UAE continued to dominate in terms of IPO proceeds, securing almost 56.3% of the issuance proceeds. Largest IPOs and Market Dominance * ADNOC Gas's IPO was the largest in the region, raising US$ 2.48 billion. * ADES Holding and Pure Health were among the top three IPOs in terms of proceeds. 2024 Outlook and Trends * The pipeline for 2024...suggests around 28-30 companies between announced, mandated, and rumored GCC IPO issuances. * Expectations of similar performance to 2023 with diverse sectoral participation. Sectoral Trends and Technology Sector * Technology sector reclaimed the top spot in IPO proceeds, led by semiconductor companies. * The Technology sector...saw a 30% year-over-year increase. Investment Bankers' Role in 2024 * Investment bankers in 2024 will need to be mindful in advising corporates about institutional investor interest. * Importance of clear messaging from corporates for strong IPO showings. Tadawul and UAE Exchanges as Key Destinations * Tadawul and UAE exchanges (ADX & DFM) likely to remain main listing destinations. * Pipeline indicates continued activity in these exchanges. Government Support and Initiatives * Governments in the region support IPO markets through state-owned candidates and initiatives like ADIPOF. * ADIPOF poised to aid Technology and Hospitality industries in reaching the markets by end of 2024.
Within Saudi Arabia, the Nomu– Parallel market led in terms of number of issuances with 27 deals, compared to 8 for the Main Market. The UAE continued to dominate in terms of IPO proceeds, securing almost 56.3 percent of the issuance proceeds at around US$6.07 billion from its 8 listings on UAE exchanges in 2023.
The average listing size of IPOs on UAE exchanges was approximately US$ 759 million, significantly higher than the rest of the GCC average listing size of about US$124 million. The region’s largest IPO was from ADNOC Gas, which supplies around 60 percent of the UAE’s natural gas needs. The company raised US$ 2.48 billion from the sale of 5 percent of its business through its primary market issuance, as reported by Bloomberg.
The pipeline from GCC IPO candidates in 2024 suggests a repeat performance is achievable. The backdrop for IPOs from 2023, including interest rates, geopolitics, secondary stock market volatility, and oil price volatility, will continue to be crucial in 2024.
The pipeline for 2024, based on Kamco Invest’s estimates at the start of the year, suggests around 28-30 companies between announced, mandated, and rumored GCC IPO issuances. This indicates that a repeat of 2023’s performance is possible, as similar estimates were available the previous year.
However, if 2023’s trends continue, we may see issuance proceeds dominated by a smaller number of larger issues, while several smaller IPOs are expected to debut on markets like the Nomu. Sectoral participation is likely to be as diverse as it was in 2023.
ADES Holding Company, a Saudi Arabian owner and operator of offshore and onshore rigs, recorded the second-largest IPO from the region, with issuance proceeds of US$ 1.2 billion before listing on the Tadawul Main Market.
Pure Health from the UAE rounded off the top three GCC IPOs, raising US$ 0.99 billion from its IPO and subsequently listing on the ADX.
Oman (MSX) contributed the fourth-largest IPO in the region with OQ Gas Network, which raised US$771 million for 49 percent of its stake, according to Bloomberg estimates. Another energy company, Abraj Energy Services, also from Oman, raised US$ 244.1 million via its IPO and listed on the MSX. Both Omani issues were significantly oversubscribed.
Separately, Qatar witnessed the IPO of managed IT services and solutions provider MEEZA. The company raised US$ 232.67 million from its public offering and was listed in August 2023.
According to EY, the Technology sector reclaimed its top spot after being overtaken by Energy in 2022 in terms of IPO proceeds. However, the sector continued to experience a sequential decline in IPO numbers, valuations, and after-market performance, similar to 2022. Within the Technology sector, semiconductor companies reportedly dominated, accounting for 58 percent of proceeds and seeing a 30 percent year-over-year increase.
The report suggests that clear messaging from GCC corporates and investment bankers could lead to another strong IPO showing in 2024. While IPO valuations have not been a concern for major issuances from the region, investment bankers in 2024 will need to be mindful in advising corporates about institutional investor interest, as they look to allocate capacity for new IPO issuances.
Past trends of strong interest and post-listing market performance for businesses with unique characteristics, clear growth prospects, competitive positioning, and/or dividend yield expectations should encourage IPO candidates to enter the primary market confidently, though this should be within the context of stable secondary market performances.
Furthermore, the pipeline of announced, mandated, and rumored GCC IPO issuances suggests that Tadawul may continue as the main listing destination for the region, followed by UAE exchanges – ADX & DFM.
Governments in the region continue to support IPO markets both by bringing suitable state-owned candidates to the market and through initiatives such as the Abu Dhabi IPO Fund (ADIPOF). This fund is reportedly poised to help prospective companies within the Technology and Hospitality industries reach the markets by the end of 2024.