Economists far and near differ widely in their forecasts on when leading financial markets will enter into a new virtuous cycle, but one thing experts do agree on is that the global investment landscape has changed drastically in the past year due to the US-born financial crisis. As companies had to delay or cancel their plans for initial public offerings (IPOs), stock exchanges have been scrambling to drum up IPO business as investors continue to remain cautious and in standby mode.
There have only been three IPOs in the past two months in MENA region, with a total value of $99.15 million. This is not entirely bad when compared to the United States’ one IPO so far this year. Yet the lonesome offering of pediatric nutrition maker Mead Johnson Nutrition Co., a spin-off by drug company Bristol Myers Squibb Co., raked in more than $780 million, which was admittedly leagues larger than the three MENA IPOs combined.
March was void of any IPO subscription offerings — a stark contrast to nine companies that had invited subscribers in the same month a year ago — but there was a bit of consolation as the first quarter in 2009 saw the trading debuts of three companies. Quite remarkably in these shaky times, two of the three newcomers ended their first day up by healthy percentages: Etihad Atheeb, which started trading on March 21, climbed 55 percent and Green Crescent Insurance Co ended its first day on March 26 with a sunny gain of 32 percent, both from the issue price.
Both companies had listing obligations under legislated rules for their specific industries but the mandatory nature of their debuts apparently did not impede investor interest. On the other hand, construction group Drake and Skull International, which had delayed its debut by quite a while, traded 27.5 percent lower on its first day of March 16. The listing environment for the company, whose IPO last July was hugely over-subscribed, was subdued by the real estate and construction sector performance even as the firm had a surprise in store for listing day in the form of announcing a $162 million contract.
It is too early to speculate if March marked a singular low month in primary market activity around the Middle East, but the gains of Etihad Atheeb and Green Crescent in their first sessions at least give room for new hope that things may look up in the second quarter. A positive view can be further supported by the IPO calendar for April, which entails five IPOs. According to the latest data from information provider Zawya, the five IPOs are tempting subscribers with a combined subscription value of over $1 billion. The largest of the five is Vodafone Qatar, part of the Vodafone Group. The telecom provider will offer 40 percent of its shares to the public in an attempt to raise $951.88 million. Subscription will open on April 12 and close on April 26. Afterwards, the company will list on the Doha Securities Market. The IPO will consist of 338,160,000 ordinary shares at $2.75.
Meanwhile in Saudi Arabia, the region’s largest economy, the Saudi Capital Market Authority gave its approval for four insurance firms to float portions of their shares in an IPO from April 18 to April 27. This is the next batch of newly licensed insurance firms in the kingdom and one can expect their public offerings to be calmer than those of the 16 insurers that undertook their IPOs in the 2007 to 2008 period. The shares of these newcomers will hopefully be less prone to wild fluctuations in the first months of trading.
The new Saudi insurance companies include AXA Cooperative Insurance Co. and Wiqaya Takaful Insurance and Reinsurance Co.; each has a capital of $53.3 million and each will offer 40 percent of their shares to the public. Al Rajhi Company for Cooperative Insurance, with a capital of $53 million, will float 30 percent of its shares to raise $16 million. ACE Arabia Cooperative Insurance Co., which has a capital of $26 million, will offer 40 percent of its shares to raise $10 million. All the companies will offer the share at $2.67.
Also in the insurance industry, Bahrain-based Solidarity Group said it has received regulatory approval to establish a $146 million firm called Solidarity Saudi Takaful Co. in Saudi Arabia, with an authorized and paid- up capital of $147.9 million. The new company, which will provide takaful and family takaful services, will float around 40 percent of its shares in an IPO between August and September of 2009. A total of 60 percent of Saudi Takaful’s capital will be raised from contributions by Solidarity and other Saudi founders, with Solidarity holding a major stake.
While enduring the first quarter dry spell in primary action, executives of regional securities markets have busied themselves with discussing potentials and expected easing of listing requirements. Jeff Singer, NASDAQ Dubai chief executive told the press that NASDAQ Dubai “expects companies to resume launching IPOs by the second half of this year.” Singer also spoke of plans to ease listing thresholds to draw more IPOs from local family-owned firms.
“NASDAQ Dubai is in talks with several UAE companies, including some that are government-owned, about IPO listings at the exchange,” Singer said. “We expect to see some activities by the third or fourth quarter of this year, provided the market window opens,” he added. New listing policies would allow companies to list, but offer less than the current mandatory minimum of 25 percent of their shares and reduce the minimum capitalization requirement for companies hoping to list on the exchange.