Capital raised by GCC IPOs declines in 2015
Traders look at share prices on an electronic display at the Doha Stock Exchange in Doha, Qatar June 3, 2015.- Reuters
Dubai - The total number of IPOs/listings in the region fell by around 65 per cent year-on-year to six issuances from 17 deals recorded in 2014, Kamco said in a review.
The initial public offering (IPO) market in the GCC saw subdued activity in 2015, after the breakaway year in 2014, according to Kamco Investment Co.
The total number of IPOs/listings in the region fell by around 65 per cent year-on-year to six issuances from 17 deals recorded in 2014, Kamco said in a review. "After almost equalling the pre-crisis highs of capital issuances via IPOs in 2014 ($10.89 billion), total capital raised during 2015 plunged by 86 per cent year-on-year to $1.48 billion," said the report.
The trend in the GCC was in line with the global scenario where cross-border IPOs slid back to just below 2013 levels in 2015 after significantly outperforming domestic initial public offerings in both value and volume growth terms in the past two years, according to a report from Baker & McKenzie. "Only the Europe, Middle East & Africa region showed growth in domestic deals. Global trends were reflected in the UAE, Saudi Arabia and Egypt," it said.
Cross-border IPOs took the biggest hit, raising $37.8 billion globally as of December 10, a 53 per cent drop-off from last year, as sluggish markets, geopolitical uncertainty and other factors led to a year dominated by mergers and acquisitions rather than debt offerings.
According to EY, IPO trends receded in 2015, albeit at a slower pace compared to the GCC, as the number of IPO issuances fell by two per cent to 1,218 deals, while capital raised declined by 25 per cent to $195.5 billion. The Asia-Pacific region reportedly dominated IPO activity globally in 2015 with 55 per cent of the deals, despite the freeze of Chinese exchanges on IPOs for a period of time during the year
Steven Drake, Head of PwC's Capital Markets and Accounting Advisory Services team in the Middle East, has said with the continued volatility in oil prices, regional geopolitics such as Yemen and Syria, together with the slowing of the Chinese economy amongst other factors that transpired this quarter have weighed heavily on the equity markets and IPO issuances alike. Reflecting the weak market sentiment issuers have put any plans of listing on hold until market conditions improve and the right time to IPO emerges, he said.
According to Kamco , corporates looking to enter the market remained cautious during the year, as the significant drop in oil prices that transpired during 2015, coupled with geopolitical concerns and global economic uncertainty weighed heavily on IPO issuances and equity markets.
The report said Saudi Arabia remained the most active IPO market in the GCC in 2015, as it saw four out of the region's six IPO deals listed on its exchange.
The kingdom started the new year on a positive note with the announcement that it is considering listing its state-owned oil producer, Saudi Aramco.
Aramco is the world's largest crude oil producer and if the initial public offer goes through, Saudi Aramco would rank as one of the most highly valued listed companies globally. A possible listing of the oil giant will help bolster Saudi government finances after the current rout in oil price contributed to a record 367 billion Saudi riyals budget deficit in 2015.
Apart from the already announced IPOs in the GCC for 2016, the year forward is likely to push issuers with ambitions of listing to put their plans on hold, until market conditions improve and concerns considerably alleviate.
All IPOs listed in the GCC during 2015 remained oversubscribed, with Oman's Phoenix Power receiving the maximum response from investors, as the issue was oversubscribed by 15 times. Saudi Company for Hardware received a significant positive response as well, as the issue was oversubscribed by over six times, followed by Saudi Ground Services Co, which saw its IPO being oversubscribed by 3.4 times.