GCC's share of global IPOs jump to 23% in 2022; UAE leads with 12 companies raising $11 billion

Led by the UAE, the GCC's share in the global initial public offering (IPO) has massively increased in 2022.

According to EFG Hermes, out of $91 billion (Dh334 billion) raised through IPOs worldwide, around $21 billion (Dh77 billion), or 23 per cent, were raised by GCC companies in 2022. This is a massive increase when compared to the previous year when GCC IPOs accounted for just two per cent, or $10 billion, of the global IPOs.

In 2022, as many as 12 UAE companies came to the market, raising $11 billion (Dh40.37 billion), in addition to the joint Abu Dhabi-Riyadh listing of Mena food franchisee Americana, which raised $1.8 billion.

Many Dubai entities such as the Dubai Electricity and Water Authority (Dewa), Tecom and Salik sold their shares to the investors and listed on the Dubai Financial Market as part of the government’s efforts to increase the local bourse’s market capitalisation to Dh3 trillion.

Simon Kitchen, managing director and head of strategy, EFG Hermes Research, said volatility in global financial markets has squeezed IPO activity outside the region, and GCC companies have been able to sell equity at high valuations.

“The listing of Dewa was the largest GCC IPO in 2022, raising $6.1 billion at a perfect time when global investor attention was rapidly shifting from Russia to the GCC… Dewa is now the largest by market cap on the Dubai exchange,” he said.

“Investors have been attracted to Dewa due to steady cashflow and potential for dividend generation, and they saw similar strengths in other major Dubai listings in 2022, when Salik, Empower and Tecom collectively raised $2.2 billion in June, September and November, respectively,” added Kitchen.

He hailed the government’s decision to sell stakes in more mature businesses like Dewa or Adnoc Drilling, freeing up cash to invest elsewhere.

IPO pipeline

Kitchen said the GCC IPO pipeline for 2023 looks very strong as both governments and private companies are keen to sell equity while there is strong interest in the region.

“GCC markets are trading at a decent premium to emerging market peers. The MSCI GCC index is at 13.2x 2023 price-to-earnings (PE); the MSCI EM index is at 11.5x 2023 PE. This premium is large enough for GCC companies to sell equity, but not large enough to deter investors,” said EFG Hermes’ managing director.

In an interview with Bloomberg TV, Mohamed Ali Al Shorafa, chairman of the Abu Dhabi Department of Economic Development, said recently that 11 IPOs are likely to hit the market in 2023.

“Next year, it’s going to be an amazing pipeline… Over 11 companies (are) being either advised or in final stages for application approval for the listing on the Abu Dhabi stock market,” Al Shorafa said.

Due to rising interest rates by the US Federal Reserve and the GCC central banks, Kitchen said investors in the region face a trade-off: they either keep investing in IPOs and the broader market, or take some money off the table and put it in bank deposits.

“That makes it more important for GCC companies to appeal to foreign investors as they come to the market… 2023 should be the year in which more GCC private companies meet global emerging market investors in the ongoing GCC boom,” he said.

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