EY: MENA IPO momentum to continue into 2024 with promising pipeline

According to the EY MENA IPO Eye Q3 2023 report, MENA markets saw six initial public offerings (IPOs) during Q3 2023, raising US$523m. This represented a 14% decrease in the number of IPOs and a 66% drop in proceeds when compared to Q3 2022. First-day returns were positive, with all six listings registering a gain.

At the end of Q3 2023, there were a total of 29 IPOs year-to-date (YTD) in MENA with total proceeds of US$5.8b, marking a 6% reduction in volume and a 61% decline in funds raised year on year (y-o-y). All YTD listing activity took place in the GCC region.

Despite the lower levels of proceeds from MENA listings, the IPO pipeline for Q4 2023 and into 2024 remains promising, particularly driven by the Kingdom of Saudi Arabia (KSA), where 27 companies have announced their intention to list on the Tadawul. 

Brad Watson, EY MENA Strategy and Transactions Leader, says:

“Investor confidence in the region continues, with 21 out of the 29 year-to-date IPOs ending Q3 2023 with a gain in share price since listing. IPOs remain driven by the dominant economies of the KSA and the UAE, which are pursuing their strategic agenda of increasing capital market activity on the local exchanges and stepping up efforts to attract foreign investment.”

Saudi Arabia accounts for majority of listings

Once again, KSA reaffirmed its dominance in terms of IPO activity in the region with five of the six listings in Q3 2023, raising US$330m in total. Lumi Rental Co, which listed on the Tadawul Main Market, raised the highest proceeds at US$291m. The remaining four IPOs raising a combined total of US$39m took place on the Nomu – Parallel Market. Nomu also witnessed two direct listings – Paper Home Co. and Al Rashid Industrial Co. In addition, Sumou Real Estate Co., which had been listed on Nomu in Q1 2020, moved to the Tadawul Main Market in September 2023. 

As part of Vision 2030, KSA continues its economic diversification drive by reducing its focus on oil-related activities, with three of the IPOs from the transportation sector contributing US$302m of the total proceeds. Munawla Cargo Co. reported the highest first-day gain at 69%. 

The fourth quarter of 2023 kicked off with three Saudi listings in October – ADES Holding Company on the Tadawul Main Market, and Atlas Elevators General Trading & Contracting Co. and Intelligent Oud Co for Trading on the Nomu.

Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, says:

“Despite a slow Q3 2023, we are still optimistic that the remainder of 2023 and 2024 will show a healthy number of IPOs on the MENA markets based on current pipelines. The fourth quarter of 2023 is already off to a strong start with three IPOs successfully completed in KSA, and we are expecting additional IPOs toward the end of 2023 in the UAE. However, we are facing a risk that the ongoing geopolitical challenges in the region will adversely impact investor sentiment.” 

Sustainability focus on the rise

Sustainability initiatives continue to gain prominence in the region, with companies increasingly realizing the importance of environmental, social, and corporate governance (ESG) to investors. With the UAE gearing up to host the 28th UN Climate Change Conference (COP28) this year, MENA stock exchanges are doing their part in supporting ESG reporting and adoption. The Egyptian Exchange (EGX), Abu Dhabi Securities Exchange (ADX), and the Dubai Financial Market (DFM) have all mandated their listed companies to report on ESG performance. The Muscat Stock Exchange (MSX) has encouraged voluntary ESG reporting for 2023 activities and mandatory ESG reporting to start from 2024, while several other exchanges - including the Tadawul - have published guidance on ESG reporting.

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