A total of four initial public offerings were floated in the third quarter in the Gulf region, which was a slight increase compared to the previous quarter. However, proceeds raised from the third quarter amounted to $140 million, which were lower by $31 million compared to the second quarter of 2017, according to a report released by PwC. In comparison to the same period last year, the third quarter in 2017 experienced a recovery, as there were no IPOs in the third quarter of 2016.
On a year to date basis, 2017 has shown a significant increase in the number of IPOs, with 17 offerings, compared to four over the same period in 2016. However, proceeds raised during the year-to-date were 4 per cent lower, compared to the same period of last year, despite the increased number of IPOs, which was mainly due to the low value of IPOs listed on the NOMU parallel market in 2017. “GCC IPO market activity this quarter gained momentum, representing a general improvement in market conditions and investor confidence in the region. We are seeing more and more companies engaging in IPO readiness activities, preparing themselves and getting ready for the right window. We expect to see companies go to market during 2018,” said Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East.
Tadawul remained the dominant exchange in the GCC, in terms of IPO proceeds, raising $110 million via two IPOs, comprising 79 per cent of total IPO proceeds in the third quarter of 2017. The largest IPO during the quarter was by Zahrat Al Waha Trading, raising $61.2 million. Muscat Securities Market witnessed its first IPOs since June 2015, raising $30 million via two IPOs, comprising 21 per cent of total IPO proceeds in the third quarter of 2017. With total proceeds of $47.1 billion via 329 IPOs, global IPO activity in the third quarter of 2017 was 23 per cent higher, in terms of proceeds, and 37 per cent higher, in terms of the number of IPOs, compared to the same period in 2016.
Low volatility, coupled with high equity valuations, created a favourable listing environment. The only significant source of risk emanated from the Korean peninsula. As political uncertainties in Europe have largely disappeared, and tax reform is on the agenda in the US, the typically strong fourth quarter looks promising. Another strong display by GCC debt issuers, as investors’ appetite for sovereign issuances remained relatively high, saw Saudi Arabia and Bahrain among key sovereign issuers.
Saudi Arabia’s domestic Sukuk programme included three tranches - a 16.525 billion Saudi rial five-year tranche, a 14.475 billion Saudi rial seven-year tranche and a 6 billion Saudi rial 10-year tranche. Further, Bahrain raised a total of $3 billion, via a $2.150 billion international bond and a $850 international sukuk. DAE Funding, a wholly-owned subsidiary of Dubai Aerospace Enterprise Ltd, also issued a $2.3 billion bond, which was split into three tranches. “GCC governments continue to tap into both domestic and international debt markets, bolstering their budgets amid prolonged low oil prices. We are set for a busy end of the year, with both Saudi and UAE governments expected to tap the debt market with their international bond sale of $12.5 billion and $10 billion, respectively,” said Steve Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East region.