Regional IPO market sees 80% year-on-year drop in values in Q2

The regional IPO market slowed in the second quarter of the year primarily due to uncertainly in the capital market, according to a new report by consultancy EY.

The six IPOs recorded across the MENA region in Q2 collectively raised $397.2m – a 40 per cent decrease in volume and 81 per cent decrease in value compared to the same period last year.

The six deals included two in Saudi Arabia (Al-Yamamah Steel Industries and L’AZURDE) worth $273.6m, two deals in Egypt ($44.1m), one in Algeria ($58.1m) and one in Tunisia ($21.3m).

Phil Gandier, MENA Transaction Advisory Services leader at EY said: “Given the recent trends, Saudi Arabia and Egypt are the key MENA markets that are likely to see any IPO activity in MENA.

“Uncertainty in the global capital markets, driven by events such as the vote by the UK to exit the European Union and fluctuating oil prices, may result in future uncertainty in the MENA capital markets and the potential deferral of IPOs in the MENA region.”

Looking ahead, new regulations could strengthen MENA capital markets, EY stated.

The UAE has circulated new draft IPO regulations for feedback from stakeholders, “setting requirements increasingly in line with international exchanges.”

In Saudi, the Capital Market Authority has announced several major changes such as relaxing the requirements for foreign institutional investors, introducing new trading options and the relaxation of reporting deadlines and the implementation of a new settlement process.

Also read: Saudi to let foreign institutions buy shares in IPOs

Saudi and Qatar have also announced plans to open a new exchange for small and medium-sized companies towards the end 2016 or beginning of 2017.

“Once the economic environment stabilises and general market sentiment improves, the backlog of IPO candidates will begin to emerge,” said Mayur Pau, MENA Growth Markets and Financial Services IPO leader at EY.

“Looking historically at economic cycles, the right window of opportunity is often quite short, so it is crucial for companies who are looking to IPO to prepare well in advance. That way they can hit the market when the time is right.”