It’s been a long, barren fall season for the IPO market in the MENA region. If December is any indication, the drought in the market is expected to carry through to the first quarter of 2009. Only three IPOs managed to raise a paltry $14.54 million in the fourth quarter of 2008, compared to 17 IPOs with a value of $7.55 billion in the forth quarter of 2007. As of mid-December, 53 regional IPOs have raised $13.24 billion in 2008, a nine percent drop compared to $14.42 billion raised by 69 firms in the same period of 2007. The only successful IPO to debut in the forth quarter was Syria’s Bank Al Sharq, which raised $9.78 million. The floatation, managed by Bemo Saudi Fransi was 438.24 percent oversubscribed. But Syria’s attempt to break the IPO slump ultimately failed and the slump-o-meter registered zero IPO announcements in December. However, analysts say the number of IPOs scheduled to be launched in the first and second quarters of 2009 will once again make the region a fertile ground for IPOs. According to data from Zawya, the number of IPOs planned for the first half of 2009 reached 38 as of mid- December. Ten IPOs are to be launched in the first quarter and 28 in the second quarter, with a potential value of between $10 billion and $25 billion. Add to this the rumored IPO of real estate developer Nakheel, which plans to launch $15 billion in 2009, and the IPO hiatus may really come to an end. If successful, Nakheel will become the largest publicly traded real estate company in the region — even larger than Emaar.
What does 2009 hold for the IPO market? As it stands now — and this may change drastically in the coming months — Saudi Arabia, the region’s largest economy, will be the host of four companies with plans to launch in the first quarter. The agriculture and food firm, Al Akhawain, will offer 30 percent of its shares to the public seeking to raise $26.66 million. The travel and tourism company, Herfy Food Services, a fast food subsidiary of Savola Group, will be offering 30 percent of its shares. The company did not disclose the amount it wants to raise, but it will offer around 3 million shares. Aujan Industries said it will also go public, offering 30 percent of its shares with the offer size ranging between $160 million and $213 million. The multi-line conglomerate, Mohammed Abdul Aziz Al Rajhi and Sons, will also sell 30 percent of its shares in the first quarter, without specifying the amount to be raised.
Moving to Qatar, three companies will be going public in the first quarter of 2009. Al-Mazaya Holding Company seeks to raise around $137 million by offering 50 percent or 50 million shares priced at $2.75 to the public. The Qatar- Bahrain Takaful Insurance Co. said it will offer 60 percent of its shares to the public in the first quarter of 2009, without providing the size of the offer. The telecom powerhouse Vodafone Qatar will offer 55 percent of its shares to the public. Forty percent will be offered to retail investors while an additional 15 percent will be allocated to institutional investors.
Bahrain’s second largest mobile operator, Zain Bahrain — a subsidiary of Kuwait’s Zain — had previously delayed its IPO. However, it has now confirmed that it will offer portions of its shares in the first quarter of 2009. Although it is not clear how much the company wants to raise, media reports put Zain Bahrain’s share offer on the LSE at around $4 billion. The region’s first fully integrated real estate and construction solutions provider, Naseej, is seeking to raise around $265.3 million by offering 40 percent of its shares in the first quarter of 2009. Regardless of the market upheaval on the KSE, Kuwait National Airlines went ahead with listing its shares on the Kuwait Stock Exchange on December 15. The company had raised $1.82 billion in an IPO in 2006 for Wataniya Airways, which will launch in February 2009.
Moving to North Africa, Tunisia’s telecom and IT company, Servicom, will be launching its IPO in the first quarter of 2009, seeking to raise $2.5 million.
And last but not least, the UAE, whose economy has been battered by the impact of the global financial crisis and the credit crunch, announced zero IPOs in the first quarter of 2009.
To hang back or not to hang back?
Like the broader regional markets, which experienced wild volatility in the last quarter of 2008, IPOs suffered from investor panic as the financial crisis enveloped more firms and economists began to speak more about corrections, whether in the real estate or financial sectors. Issuers and investors alike are hanging back from taking the plunge into IPOs until there is more clarity and stability in the stock market. Is this a wise move?
There are some observers who believe that local business leaders and governments should take advantage of this global economic downturn and invest in strategic projects and companies that are now well below their book value. The investment plan should start with regional investment opportunities first and as a last resort it should consider investments abroad.
Several research houses have re-iterated their conclusion that the fundamentals of the region’s economies and capital markets are strong. And if anything, the recent volatility in the markets has helped in bringing down the price of listed shares to their normal or viable levels. And now would be an ideal time to start an investment portfolio in the region or add to an existing one.
Is it time to hang back and wait for the stability to return or is it time to snap up some good opportunities/investment? The answer to this question will reveal itself in the first quarter of 2009 and with it — possibly — the return of a vibrant IPO market.