What's behind the IPO boom in the Middle East?
By Svetlana Fathers, Producer of SuperReturn Middle East
The Middle East is increasingly attracting global investors and the region is experiencing an IPO boom against the backdrop of a “dying” market in Europe, as reported by the Financial Times (FT).
According to the publication, on March 27, trading on the Abu Dhabi exchange was launched by data analysis company Presight AI. During the initial offering, the value of its securities increased by 176% per day. During the IPO, the company raised 1.82 billion dirhams ($496 million), the subscription was exceeded by 136 times.
This is not the only story of a successful IPO in the Emirates. Two weeks earlier, natural gas firm Adnoc Gas raised $2.5 billion in a listing in Abu Dhabi, the largest emirate in history.
There were 51 IPOs in the Middle East and North Africa in 2022, according to EY analytical agency. In total, companies were able to raise $22 billion, which is 179% more than in 2021.
Financial regulatory reform in the Middle East, political stability and rebounding oil and gas prices from pandemic lows have led to a frenzy of IPOs.
Saudi Arabia is rebuilding its oil economy under Crown Prince Mohammed bin Salman. The UAE has been able to attract financial groups to its commercial hub in Dubai and has launched a dizzying number of listings in the country's oil-rich capital, Abu Dhabi. Qatar, whose economy has recovered from the success of the World Cup, is doubling its gas exports.
Private equity fund managers invested some $19.8 billion in 191 deals in the Middle East last year, according to the Global Private Wealth Association. In comparison, about $600 million was invested in the region in 2018. The Middle East was the only region in the world where in 2022 there was an increase in the value of investments on an annual basis.
Growth of capitalisation in Saudi Arabia
The combination of regulatory reform and high oil prices is felt most strongly in the Saudi stock market. In 2019, the $29 billion listing of one of the most valuable companies in the world, Saudi Aramco, set off a surge in IPOs in the kingdom. 2022 was a record year for the kingdom. In total, over the past five years, the market capitalisation in the region has grown by about 475%.
The Saudi market regulator said there are currently 269 companies registered in the kingdom, up from 188 at the end of 2017. At least 80 more are being prepared for placement on the stock exchange.
Dubai and Abu Dhabi exchanges attract Western hedge funds
A similar situation is observed in the UAE.
Dubai's successful fight against the pandemic has attracted cryptocurrency billionaires and financial executives who have taken advantage of its open economy. Many have put down roots by persuading their firms to follow suit.
Hedge funds and asset managers, including major players Brevan Howard and ExodusPoint, have settled in Dubai's financial district. The city is currently in talks to license another 50 hedge funds. Their managers are attracted by the UAE's tax-free environment and a lucrative trading window spanning Asia and the US.
In summary, The Middle East is currently experiencing an "IPO boom" and we are yet to see what’s to come in 2023.
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