IPO appeal: 84% of UAE investors likely to invest in future offerings

Findings from the UAE Investor Pulse Survey 2024, conducted by Edelman Smithfield, revealed a significant investor appetite for UAE IPO offerings in 2024, with a majority (84 per cent) of UAE investors expressing their readiness to invest in future IPOs.

The survey indicates a positive sentiment among investors regarding the valuation of firms that have undergone IPOs in the past three years. Seventy-three per cent of investors view these firms as fairly valued, underscoring a well-balanced market perception.

Additionally, the survey reveals a significant vote of confidence among investors in the bookbuilding process, considered a critical aspect of IPOs. An impressive 71 per cent of investors have expressed trust in the bookbuilding process, indicating a high level of satisfaction and faith in its transparency and efficacy.

Another key finding is that approximately two-thirds (67 per cent) of respondents agree that having two distinct exchanges benefits the UAE capital markets and offers increased investment opportunities.

Growing appetite for UAE IPOs

In light of these findings, Simon Hailes, MD and head of Middle East at Edelman Smithfield, remarked, “Our Investor Pulse Survey provides valuable insights into investor sentiments and expectations regarding the region’s capital markets. It’s encouraging to witness the growing investor confidence in the UAE markets and their strong appetite for UAE IPOs.

“However, to maintain this IPO momentum, potential and existing issuers must prioritise transparent and consistent communication efforts. Our survey findings validate this, revealing that two-thirds of investors expect transparency and effective communication from issuers to make informed decisions.”

Hailes added, “With the region increasingly recognised for its economic vitality and investment potential, our insights strongly support the growing investor interest in UAE capital markets.”

Read: GCC region sees 10 IPOs raise $1.2bn in Q1 2024: EY

Key findings from the IPO-focused survey include:

For transparency and communication: 65 per cent of investors prioritise transparent communications for informed decisions, and 63 per cent highlight the positive impact of well-produced roadshow videos on investment willingness.

For use of proceeds: 67 per cent consider the use of proceeds when evaluating potential investments.

For evaluating investment opportunities: 82 per cent emphasise the importance of quality earnings in evaluating investment opportunities.  Profitability (41 per cent), strong balance sheet (31 per cent), and brand awareness (27 per cent) are key metrics for evaluating companies going public.

For investment plans and guidance: 71 per cent of investors prefer new issuers with organic growth investment plans. There’s a push for increased clarity and availability of medium-term guidance on a quarterly basis.

In terms of board preferences: Investors prefer boards with diverse experience, including overseeing publicly listed entities (82 per cent), cybersecurity (84 per cent), and ESG (84 per cent).

Concerning sector interest: Real estate (51 per cent), tech (41 per cent), and healthcare (33 per cent) are the top sectors of interest.

The global economy experienced a slower growth rate in 2023, marked by high interest rates, inflation, and geopolitical tensions.

However, the UAE’s resilience resulted in positive IPO market conditions, which saw the country contribute circa 58 per cent of 2023 IPO proceeds in the GCC.