After the Saudi Stock Exchange (Tadawul) welcomed four out of nine listings in the Middle East and North Africa (MENA) last year, Saudi Arab is expected to maintain its lead in the region with ten initial public offering (IPO) candidates to hit the market in 2021, according to a recent economic report.
Picture by Bloomberg.
Consultancy firm Ernest and Young noted in the MENA IPO Eye Q4 2020 report that the COVID-19 pandemic erected a roadblock on the promising development path of MENA IPOs in the first quarter of 2020. While the period enjoyed four IPOs raising $814 million, including the largest listing of Dr. Sulaiman Al-Habib Medical Services Group Company, it recorded only one listing in the third quarter and none in the second.
The drop in economic growth and disruption across various industries caused by the COVID-19 pandemic are the main reasons for this dismal MENA stock performance in 2020, consultancy firm Ernest and Young noted in the MENA IPO Eye Q4 2020 report. Adding to this are the decline in demand for oil, and subsequent reduction in oil prices, causing the total proceeds raised in the region to fall. The amount reached only $1.86 billion, a staggering fall of 94 per cent compared with 2019.
As the fourth quarter is back on its feet with four listings, “the outlook for the Kingdom’s markets remains positive for 2021,” commented Abdulrahman Moulay Albizioui, EY KSA Strategy and Transactions Leader.
The Kingdom of Saudi Arabia was dominant in generated proceeds in the region last year, accounting for 78 per cent of the issuance of stocks. More than 10 companies of the country are expected to debut on the region’s stock exchange in 2021, though it is one third lower than the potential listing applications reported by authorities in January, according to another report.
“High valuations coupled with government incentives have made IPOs an attractive route to raising money,” the report noted, calling Saudi Basic Industries Corp’s specialty chemicals unit, Solutions by STC, ACWA Power and Theeb Car Rental Company among the companies to privatise this year.
There needs to be more time in defining the dominating industries of the upcoming ten listings. Last year, out of four issuances, one in retail and one in healthcare.
Analysts also predict the positive momentum in the global IPO market, with the overall performance last year even marked the highest amount of issue volume since 2010, largely contributed by the U.S., China and Europe’s IPOs in the fourth quarter.