The GCC’s plans to re-engineer family businesses and a serious push towards privatization have started what could be soon known as the “hottest IPO market in the world,” analysts say. The IPO market had raised well over $4 billion in the first quarter of 2008, compared to just $1 billion in the first quarter of 2007. Also in the first quarter, regional companies announced over $14 billion in IPOs; these figures come at a time when IPO markets in the more developed economies are experiencing a downturn. The number of IPOs in the U.S. dropped by 73% in Q1 2008 compared to Q1 2007. Only 12 firms floated shares in the same period on one of the top U.S. stock exchanges compared to 44 in Q1 2007.
If the month of April is at all a telltale sign, the trend is expected to continue unabated and foreign interest in regional markets will continue to rise as well. April witnessed a flurry of IPO announcements and closings, starting with the hottest and the largest IPO in the region this year — that of Saudi-based Inmaa Bank, a shariah-compliant financial institution which raised SAR 18.3 billion (US$4.89 billion) in its initial public offering on April 17. That’s 74% over subscription with 9 million Saudi investors quickly snapping up around some 1.05 billion shares.
Still in Saudi Arabia, Basic Chemical Industries, a manufacture of construction chemicals, announced that it will offer 30% of its shares to the public starting on May 24. The company will offer 6.6 million shares but it did not disclose the amount it wants to raise. Consumer goods manufacture, Al Othaim Markets Company, said in early April that it plans to raise 22.5 million by offering 6.75 million shares or 30% of the company’s capital. The launch of the IPO is expected to start on June 21 and end on June 30. Also playing in the same ballpark of figures, Halwani Brothers, an agriculture firm, will offer 30% of its capital to the public, or 8.57 million shares on June 21. Although Halawani did not disclose the amount it is seeking to raise, the proceeds are expected to go towards the company’s strategic local and regional expansion.
Moving north to Kuwait, Al Ahlia Real Estate Projects, a subsidiary of Al Ahlia Holding, announced in late April that it will launch an IPO for 49% of the company in the second quarter of 2008. Company officials did not provide any more additional details but discussed a possible listing on another regional market in addition to Kuwait.
For the UAE, the region’s hottest economy, April was a slow month where only one serious announcement was made. M’Sharie, the private equity arm of the Dubai Investments, said it will offer around 40% of its shares to around “10 investors” in a private placement on May 8. According to media reports, the private placement is a prelude to an IPO in 2010. M’Sharie’s portfolio consists of 19 companies with principle activities in the construction industry.
In Oman, Nawras, the country’s second telecom operator, has appointed two international banks to advise them on their planned IPO, scheduled for late 2008. Also, following suit, Barr al Jissah Resort Company said that plans for an IPO are now under consideration and a “definite” announcement will be forthcoming in the second half of 2008.
In North Africa, two interesting announcements came out in early April. Sudan Telecommunications (Sudatel), said that it needs to raise an additional $1.75 billion to fund its expansion plans. Sudatel is listed on Khartoum Stock Exchanges, Abu Dhabi Stock Market and Bahrain Stock Exchange. The company plans to raise the money through rights issues on all three exchanges, but it did not say when. Meanwhile, in Morocco, Label’Vie, a consumer goods firm and Chaabi Lil Iskane, a real estate company, announced plans to go public in the second quarter of 2008, but both did not provide any details about the offer.
So it appears that local investors will have a large, if delicate, menu to choose from in the second half of 2008. The IPO fever in the region is only expected to reach higher temperatures and investors’ appetite remains wet as a new wave of listings is expected to take local markets to new heights. But observers warn that despite the record IPO announcements local markets still have much to do in terms of providing better transparency, shareholders protection and opening up the markets to foreign ownership. Observers point out that even though Saudi Arabia has taken some steps to liberalize its economy, much more is needed to enable proper marker functioning. For example, the IPO Al Inamaa was exclusively available to Saudi citizens, with non-Saudis banned from participating in the offer.
The stock markets of the GCC are now a serious financial force to reckon with, but governments and local investors must continue to advocate additional policies to promote better trading principles, further innovation and most importantly, more transparency in effort to protect both, the local and foreign investor participating in these growing markets.