- The MENA region saw a total of nine IPOs in 2020, raising proceeds of US$1.86b
- In Egypt, three army-affiliated companies are expected to attract foreign and local investors hoping to own 100% stakes
- Egyptian IPO activity in was subdued in 2020, with one IPO raising US$13m
According to the EY MENA IPO Eye Q4 2020 report, the MENA region saw nine IPOs raise proceeds of US$1.86b, a fall of 40% in total issuances and 94% in total proceeds when compared with 2019. Out of the nine issuances, six were in the real estate sector, of which two were real estate investment trusts (REITs), with the remaining in the health care, consumer staples and insurance sectors.
Despite a subdued annual picture, Q4 2020 rebounded after a quiet Q2 2020 and one IPO in Q3 2020, with four IPOs in the MENA region raising US$925m in total. Although the number of IPOs decreased by 33% and proceeds were down 97% compared with the same quarter in 2019, Q4 2020 did have the highest proceeds of the year.
Globally, IPO numbers continued to pick up with 1,363 IPOs taking place in 2020, a 19% rise when compared with the previous year. Additionally, proceeds increased by 29% from 2019, rising to US$268b – the highest proceeds since 2010’s record of US$290.2b raised via 1,361 IPOs.
Matthew Benson, EY MENA Strategy and Transactions Leader, says:
“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. Markets were also impacted at a global level. Market volatility in the first half of the year was higher than at any time since the global financial crisis, although it quickly subsided, and the latter half of the year presented some strong IPO market performances. 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.”
Despite a drop of nearly 30% earlier in 2020, the Tadawul recovered to end 2020 with a positive index return of 3.6%, which was aided by the recovery in crude oil prices. The Egyptian Exchange (EGX) saw the biggest decline among the observed indices, having lost 22.3%. The Abu Dhabi Securities Exchange (ADX) ended the year relatively flat, while the Dubai Financial Market (DFM) and Boursa Kuwait indices both fell by 10% and 13% respectively during the same period. Equity markets in the MENA region experienced high volatility and average daily trading values increased significantly across the main exchanges.
Egypt announces plans to privatize three army-affiliated companies by early 2021
IPO activity in Egypt started promisingly but remained subdued throughout the year. While 14 companies were expected to go public in 2020, only one IPO – that of Emerald Real Estate Investments – ended up materializing, raising US$13m in Q1 2020. However, activity is likely to pick up, with three army-affiliated companies expected to be privatized in early 2021. These companies will attract both local and foreign investors who will have the opportunity to own up to 100% of the firms. Other anticipated upcoming IPOs are E-finance, Aman Holding, Ghazl El Mahalla and Taaleem.
During the year, the Egyptian Parliament approved the reduction of stamp duty on the sale of securities and the Financial Regulatory Authority (FRA) announced that the new Egyptian Accounting Standards (no. 47, 48, 49) implementation would be postponed until the beginning of 2021 due to the impact of the COVID-19 pandemic.
Sherif El-Kilany, EY Egypt Managing Partner, says:
“Despite the challenges of 2020, Egypt’s GDP experienced strong growth, owing to its resilient and diversified economy. IPO activity is key to helping boost market liquidity and is an enabler of FDI, which is an important pillar of Egypt’s economic development agenda. Looking ahead, private as well as state-owned companies are expected to play a greater role in accelerating their IPO plans in 2021, with several companies across different sectors indicating that their IPOs are in the pipeline. The rollout of COVID-19 vaccines will also help to sustain IPO momentum.”
Saudi Arabia continues to lead the IPO market
Saudi Arabia continued to have the most active IPO market in the MENA region in terms of both issuances and proceeds. Tadawul was MENA’s top listing venue for the year with four listings totaling US$1.45b, which represented 78% of the total amount raised by MENA IPO candidates in 2020.
Q4 2020 was the strongest quarter for IPOs based on proceeds, primarily due to the listing of BinDawood Holding (US$584m), which was the second-largest listing of the year after Dr. Sulaiman Al-Habib Medical Services Group Company (US$701m) listed in Q1 2020. Both listings were on Tadawul’s main market.
Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, concludes:
“Although MENA IPO activity remained relatively quiet in 2020, several regulators across the region announced positive regulatory changes during the year that bode well for future and existing public companies. As we start 2021, there are reasons for renewed optimism, and we see a strong IPO pipeline in key MENA markets and expect activity to pick up gradually during the new year. We have also seen some interest in mergers with US-listed Special Purpose Acquisition Companies (SPACs) in recent months following some limited activity in this area in the last two years from the region.”
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Notes to Editors
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