GCC IPO market is poised for recovery

Business Reporter  –
The Initial Public Offering (IPO) market in the GCC is expected gain further momentum thanks to the general improvement in market conditions and investor confidence, as well as a lack of traditional funding sources across the region. This was the consensus during accountancy and finance body ICAEW’s Corporate Finance Faculty roundtable about IPOs in the GCC.
ICAEW members and guests gathered in Dubai last week to discuss whether there had ever been a better time for IPOs in the region.
Panelists included Fahima al Bastaki, Executive Vice President and Head of Business Development, Dubai Financial Market; Hassan Hijazy, Senior Vice President, Investment Banking; Andrew Tarbuck, Partner, Hogan Lovells; and Umar Saleem, Group CFO, Al Jaber Group. The discussion was moderated by Gregory Hughes, Partner, MENA IPO leader, EY.
Following introductions by Sam Surrey, Principal Director, Deloitte Corporate Finance, panellists and guests discussed what is driving the latest wave of expected IPOs and the reasons why some IPOs fail to get off the ground. Panellists agreed that 2017 has been a positive year for IPOs and this can be seen in the number of IPOs raised year-to-date, which is almost four times the number of IPOs raised over the same period in 2016.
Speakers indicated that this positive sentiment is expected to continue in the near future, especially in the run-up to the milestone launch of the $2 trillion Saudi Aramco offering which is set to be the world’s largest. Government initiatives across the region, including large scale privatisation activity, are also expected to boost capital markets activity in the next couple of years.
Panelists advised that there is a shift in thinking for regional companies when it comes to choosing the stock exchange for IPOs. In the past, regional companies were going to foreign jurisdictions to issue IPOs but this is not the case now. Companies have realised that there is a lot of money in the region and that local exchanges are robust enough to attract foreign investors.
Michael Armstrong (pictured), FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “Rising numbers of IPOs can have a significantly positive effect on business growth and international networks. As oil prices recover and governments continue their diversification efforts, the IPO market in the region will continue to gain momentum.”
Speakers agreed that IPOs issued across the region are still in traditional industry sectors including commodities, energy and real estate. But they are expecting more startups to issue IPOs in the future.
When it comes to the reasons why some IPOs fail, panellists advised that the main reason is the lack of education in this field. Companies have high valuation expectations and they expect the process to be completed in a short time period, which is not always the case.
Speakers advised that companies should consider the following when planning to issue IPOs: Be patient and flexible; Understand the costs associated with the IPO; Ensure they have the right company structure in place before starting the IPO process; Deliver the financial reporting on time; Have robust corporate governance in place; and The performance of similar stock in the secondary market where the IPO is issued.