Gulf IPO values plunge 79pc
Dubai, February 14, 2012
The initial public offerings (IPO) in the GCC markets continued spiralling downwards in the fourth quarter of 2011 as three IPOs raised a mere $212 million, registering a 79 per cent drop in the offering values year on year, said a report.
This was another weak year for the IPOs in the Gulf region as issuers and investors remained wary of volatility in the capital markets, according to PricewaterhouseCoopers (PwC), a leading professional services organisation.
The offering values fell marginally by 3 per cent compared to the third quarter of 2011, the report added.
Saudi Arabia continued to lead the GCC markets with two IPOs in the last quarter of 2011 contributing $148 million or 70 per cent of the total amount raised on the GCC exchanges.
The only other offering in the GCC during the fourth quarter was Oman’s SMN Power Holding which raised $63.8 million.
Although the number of IPOs in the last quarter of 2011 remained the same as the fourth quarter of 2010, the average IPO size decreased significantly from $343 million to $71 million in 2011.
In 2011, there were a total of nine IPOs in the GCC raising a total of $789 million which was well below 2010 levels where 12 IPOs raised $2.03 billion, a 25 per cent drop in IPO volumes and a 61 per cent fall in the value.
Despite a reasonable start to 2011 with three IPOs in the first half of the year raising a total amount of $265 million, the UAE exchanges remained largely subdued with no IPO activity during the second half, said the PwC report.
Summing up a difficult year for IPOs on the regional exchanges, Steve Drake, head of PwC Capital Markets in the Middle East region, said: 'Investor risk caution coupled with issuer reluctance to sell at perceived lower valuations contributed to a slow and stifled year in the equity markets.'
'Issuers in the GCC deferred their IPO plans in 2011 as global economic instability such as the debt crisis seen in the Euro-zone and the regional political unrest impacted investor confidence,' he explained.
'However, we are beginning to see issuer interest in some regional markets although the real test will come when we see the first IPO of 2012 and the level of interest shown by the investor community,' Drake stated.
According to him, Saudi hosted five IPOs on Tadawul during 2011 which contributed 58 per cent of the total amount raised in the GCC region.
'The Kingdom continued to be the most active IPO market in the region during recent times, however, the exchange underperformed considerably in 2011 as IPO volumes fell 44 per cent whereas total money raised decreased by 55 per cent compared to 2010,' Drake noted.
Oman’s last quarter issuance was the only other issuance outside the UAE and Saudi Arabia as all other GCC exchanges remained dormant during 2011.
Drake said the regional IPO activity during the year had been difficult with both issuers and investors exhibiting caution as to when is the right time and condition to return to the market.
'As we are moving into 2012, we are seeing improvements in confidence on the supply side and so would expect to see increased activity in certain regional markets during 2012,' revealed Drake.
'We see a number of issuers beginning to prepare themselves for an IPO so that when the time is right, they are ready to act quickly,' he added.-TradeArabia News Service