MENA region raises a miserable $219m in just two IPOs in Q3
Posted on 16 October 2011 with no comments from readers
Capital markets continue to be severely depressed with just $219 million raised in only two IPOs, both in Saudi Arabia, across the whole of the Middle East and North Africa region in the third quarter.
No wonder investment banks like Dubai’s Shuaa Capital have just opted for a new wealth management strategy rather than traditional mergers, acquisitions and fund raising exercises like IPOs. The IPO business is dead.
Long gone are the days of the 2005 regional stock market boom when IPOs could attract more applications than the GDP of the UAE.
Standout Saudi
The lone country in the region to witness any IPO activity in Q3 was Saudi Arabia with two listings on the Tadawul. United Wire Factories of Saudi Arabia ($88.3 million) was listed in August and Hail Cement Company $130.5 million) in September 2011. Blame the Arab Spring?
Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young said: ‘The listings in Saudi Arabia are an exception to the lack of IPO activity in the key MENA capital markets. Investors in the region are still uncertain of what fair value is due to the follow-on effect of the EU debt crisis and the slowdown in the US. This is increasingly becoming true for almost all asset classes, including equity and IPO pricing.
‘Companies have had to postpone going to market since 2009 and will continue to do so this year. Investors are again looking for safety as uncertainty is set to continue in the fourth quarter. Predictions of listings, even in the low single digits, may not necessarily hold for the next quarter, however the pipeline of companies waiting for their IPOs is building up’.
IPO boom?
When will the deluge of IPOs come? Perhaps not anytime soon. The global IPO story is also dismal. Q3 saw 284 global IPOs worth a total of $28.5 billion against 383 worth $65.6 billion in Q2. The eurozone crisis is gradually gumming up all capital markets.
Asian issuers continued to dominate IPO activity in Q3 with 138 deals, which raised $13.5 billion or a half of global funds raised. However, this is the lowest level of capital raised by Asian issuers since Q2 in 2009. North American issuers raised just $4.5 billion in 41 deals.
Investment banks looking for new sources of business are only doing what they have to do to survive the dearth of IPOs.
