- The MENA region saw a total of nine IPOs in 2020, raising proceeds of US$1.86b
- Oman’s next IPO – Oman REIT – expected to bring in proceeds of between US$60m and US$100m
- Oman’s reforms aimed at privatization of government assets are expected to lead to an increase in IPO activity over the coming years
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 did have the highest proceeds of 2020.
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.
Oman announces several reforms to increase privatization efforts
The Aman REIF IPO on the Muscat Securities Market (MSM), which raised US$52.5m, was the first MENA IPO of 2020. The next IPO for Oman is scheduled to be Oman REIT, with the proceeds expected to be in the range of US$60m to US$100m, with a listing predicted for early 2021.
One of the most anticipated listings from Oman is of OQ (formerly known as Oman Oil and Orpic Group), the government-owned global integrated energy company. They had announced in late 2019 that they were planning to IPO 20% to 25% of their shares in 2020; however, the listing did not materialize during 2020 due to the volatility in oil prices and the impact of the COVID-19 pandemic. In Q4 2020, they announced plans to invest in alternative energy projects in Oman to further enhance their IPO story.
Oman announced several measures aimed at reducing their spending and raising revenues primarily through taxes. A VAT of 5% will be implemented in April 2021, and Oman is also expected to start implementing an income tax on high earners by 2022, an unprecedented move in the GCC countries. Reforms are expected to continue in Oman coupled with an increase in privatization efforts, which could see an increase in IPOs in the coming years.
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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