More companies in the Middle East and North Africa (MENA) are expected to go public in 2021 after the number of listings and money raised dropped last year, according to London-based global consultancy EY.
A gradual pick-up in public offerings in regional markets is expected to be driven by regulatory changes that support public companies, EY said in a report on listings in the region. The consultancy expects more than 10 initial public offerings (IPOs) in Saudi Arabia this year and accelerated listing plans by private and state-owned companies in Egypt.
“As 2021 begins, we believe that continued fiscal stimulus measures, an abundance of liquidity, and growing confidence in COVID-19 vaccination programs will sustain positive IPO momentum,” Matthew Benson, EY MENA strategy and transactions leader, said.
IPOs in 2020
In 2020, the MENA region recorded nine IPOs that raised $1.86 billion, a 40 percent drop in total issues and 94 percent decline in total proceeds compared to 2019. Six of the nine IPOs were in the real estate sector, with the reminder in healthcare, consumer stables and insurance sectors, according to the report.
Despite a subdued year, the fourth quarter of 2020 saw a rebound in activity after a quiet second quarter and one IPO in the third quarter, with four IPOs in MENA raising a total of $925 million.
“A decline in economic growth and significant disruption across various industries caused by the COVID-19 pandemic, together with a decrease in demand for oil, had a considerable impact on MENA stock performances in 2020,” Mr Benson said.
This year, however, the outlook for IPO markets in the Gulf looks promising, according to EY. Saudi Arabia is expected to see more than 10 listings in 2021 with the most notable development being the region’s largest exchange, Tadawul, preparing for its own IPO during the year.
The UAE, which made regulatory overhauls last year to further encourage listings on the local markets, is also expected to see an uptick in IPOs.
“The 2020 amendments to the Companies Law bode well for the overall development of the capital market in the UAE,” Alison Hubbard, EY MENA law leader, said. “Increased flexibility in foreign ownership, changes to the nationality requirements of board members and the increase in the proportion of share capital that owners may now sell, to name a few, are expected to lead to an increase of IPO candidates in the Emirates.”
IPO activity is also expected to rise In Egypt, with numerous issuers in the pipeline, EY said. “Looking ahead, private as well as state-owned companies are expected to play a greater role in accelerating their IPO plans in 2021,” Sherif El -Kilany EY country managing partner for Egypt, said, adding that the rollout of COVID-19 vaccines will also help help momentum.
Globally, IPO numbers were up 19 percent in 2020, while proceeds increased 29 percent, from 2019. Last year saw 1,363 IPOs with total proceeds of $268.0 billion, the highest proceeds since 2010, when $290.2 billion was raised through 1,361 listing deals.
Technology, industrials and healthcare were the most active sectors in 2020 and accounted for 59 percent of IPO deals and 64 percent of proceeds globally.