UAE leads GCC in IPO proceeds of $6.07b in 2023

The UAE continued its domination in terms of initial public listing proceeds in the GCC in 2023, accounting for almost 56.3 per cent of the region’s total issuance proceeds.

The UAE repeated its stellar performance as a regional IPO hotspot by raking in around $6.07 billion from eight listings on its bourses in 2023 amid a sustained GCC listing momentum, Kamco Invest said.

The average listing size of IPOs on UAE exchanges was $759 million and was significantly higher than the rest of the GCC average listing size of $124 million.

The largest IPO from the region was that of Adnoc Gas that supplies around 60 per cent of the UAE's natural gas requirements. The company garnered $2.48 billion from the sale of 5.0 per cent of its business via its primary market issuance as per Bloomberg.

After witnessing strong activity throughout 2022, major GCC stock exchanges remained active with listing momentum in terms of IPO numbers. However, issuance proceeds dropped even as the MSCI GCC gained by 3.7 per cent year-on-year on mixed performances from individual countries.

Total number of IPOs in the GCC declined marginally to 46 issuances in 2023 from 48 issuances in 2022, as per Kamco analysis. Proceeds for 2023 from GCC issuers dropped by 54 per cent to $10.79 billion from $23.38 billion in 2022, based on data from stock exchanges.

"Although issuance numbers were driven by smaller-ticket IPOs, post-listing performance from larger names was largely positive. Solid performances from larger stocks were backed by clear signaling and IPO pitches from companies and investment bankers about either growth prospects which drove solid price appreciation or strong dividend yields (5-6 per cent)," Kamco said.

The investment consultancy noted that dividend yields from recurring revenue generating and utility companies were sought after by investors, as many of these names also included state-owned enterprises previously, as governments in the region divested their stakes to push ahead with their diversification plans.

However, in the number of IPOs, Saudi Arabia continued its leadership position for issuances from the region in 2023 with 35 out of the 46 GCC IPOs debuting on either the Nomu or Tadawul. Within Saudi Arabia, the Nomu – Parallel market dominated the number of issuances with 27 deals, as compared to 8 deals for the Main Market.

Meanwhile, global IPO proceeds plunge a further 33 per cent y-o-y in 2023 after a dismal 2022. IPO markets globally declined in 2023 despite most equity markets witnessing healthy double[1]digit gains during the year, as seen from the 21.8 per cent y-o-y gain in the MSCI World index in 2023, Kamco said.

“Though secondary market performance typically drives IPO activity, aggressive monetary tightening leading to higher financing costs kept companies away from the public markets on valuation concerns. This drove global IPO numbers lower by 8.0 per cent y-o-y to 1,298 IPOs and caused proceeds to decline by 33 per cent y-o-y to $123.2 billion, as per data from EY," Kamco analysts said in the report.

Pipeline from GCC IPO candidates in 2024 suggests a repeat is not out of reach, Kamco noted. “The backdrop for IPOs from 2023 such as interest rates, geopolitics, secondary stock market volatility and oil price volatility will continue to remain crucial in 2024. The pipeline for 2024 based on our estimates at the start of 2024 range around 28-30 companies between announced, mandated, and rumored GCC IPO issuances, which suggests that a repeat of 2023 is possible as similar estimates were available the previous year."

However, if trends from 2023 were to repeat, "we also believe that it is likely that issuance proceeds will be dominated by a fewer number of larger issues, while several smaller IPOs should debut on the markets such as the Nomu," said Kamco analysts.