Saudi Arabia dominates MENA IPO market in 2020

RIYADH: Saudi Arabia continued to lead the initial public offering (IPO) market in the Middle East and North Africa (MENA) region with the Saudi Stock Exchange (Tadawul), representing 78 percent of MENA IPO issuances last year, according to the latest industry figures.

According to consultancy firm EY’s MENA IPO Eye Q4 2020 report, “Saudi Arabia continued to have the most active IPO market in the MENA region in terms of both issuances and proceeds. Tadawul was MENA’s top listing venue for the year with four listings totaling $1.45 billion, which represented 78 percent of the total amount raised by MENA IPO candidates in 2020.”

The fourth quarter of 2020 was the strongest for IPOs based on proceeds, primarily due to the listing of BinDawood Holding ($584 million), which was the second-largest listing of the year after Dr. Sulaiman Al-Habib Medical Services Group Company ($701 million), which listed in the first quarter of 2020. Both listings were on Tadawul’s main market.

Saudi Arabia also saw several new initiatives that have an important bearing on future IPO activity in the country, including the introduction of direct listings on the Nomu parallel market, as well as the launch of their derivatives market.

In the fourth quarter of 2020, additional updates related to disclosures becoming mandatory in both English and Arabic, as well as increases in daily price fluctuation limits for new listings on the main market were announced.

Commenting on the findings, Abdulrahman Moulay Al-Bizioui, KSA country leader at EY, said: “The capital markets in Saudi Arabia have shown their resilience during 2020, both in terms of liquidity and regulations. The outlook for the Kingdom’s markets remains positive for 2021 and as Tadawul continues its growth and status in the international capital markets, it proves to be an important avenue for investors looking to deploy domestic capital and foreign direct investments.”

The Kingdom is expected to see more than ten listings in 2021. In addition, Tadawul, which is the region’s largest exchange, is preparing for its own IPO, which is expected to be finalized in 2022. This would make it the third publicly listed stock exchange in the region after the Dubai Financial Market and Boursa Kuwait.

Gregory Hughes, EY MENA IPO and transaction diligence leader, commented: “Although MENA IPO activity remained relatively quiet in 2020, several regulators across the region announced positive regulatory changes during the year that bode well for future and existing public companies. As we start 2021, there are reasons for renewed optimism, and we see a strong IPO pipeline in key MENA markets. We have also seen some interest in mergers with US-listed special-purpose acquisition companies in recent months following some limited activity in this area in the last two years from the region.”

According to the EY report, the MENA region saw nine IPOs raise proceeds of $1.86 billion, a fall of 40 percent in total issuances and 94 percent in total proceeds when compared with 2019. Out of the nine issuances, six were in the real estate sector, of which two were real estate investment trusts, with the remaining in the health care, consumer staples and insurance sectors.

Despite a subdued annual picture, in the fourth quarter of 2020, four MENA IPOs raised $925 million in total, compared to one in the first quarter and none in the second. There were four IPOs in the first quarter of 2020, raising $814 million.

Looking to the future, Matthew Benson, EY MENA strategy and transactions leader, said: “As 2021 begins, we believe that continued fiscal stimulus measures, an abundance of liquidity and growing confidence in COVID-19 vaccination programs will sustain positive IPO momentum.”

Globally, IPO numbers continued to pick up with 1,363 listings in 2020, a 19 percent rise compared with 2019. Additionally, proceeds increased 29 percent year-on-year to $268 billion, the highest proceeds since 2010’s record of $290.2 billion raised by 1,361 IPOs.