Another poor year for IPOs expected in MENA

IPOs down1Fund managers and analysts expect few companies in the Middle East to go public while investor sentiment is so bearish.

Faced with the low oil price and unstable global markets, many candidate companies for public listings are postponing their IPO plans, says Germin Benyamin, equity manager at Dubai-based asset manager Mashreq Capital.

“I wouldn’t expect any IPOs any time soon,” she says. “The volatility in the market and the fear of low demand has led to low volumes. Everyone is postponing.”

Among the companies to have publicly postponed listings is Middle East Healthcare, which gained approval in December for an IPO in February on the Saudi stock exchange. In January, the Saudi regulator said the IPO had been postponed at the company’s request.

Mayur Pau, Middle East and North Africa (MENA) IPO leader at consultancy EY, says that unless the oil price stabilises, this year will be on a par with 2015, when 14 listings in the MENA region raised about $2.5 billion. In volume and number, that year represented a sharp decline compared with 2014, when 27 transactions raised more than $11 billion.

However, Pau says many companies in the region are continuing with IPO readiness exercises in order to be able to list as soon as market conditions improve.

The fear of signalling that they are short of money may be a disincentive for regional companies to list at the moment, says Jahangir Aka, head of MENA for Neuberger Berman.

“The family businesses are the ones that needed to have IPOs a couple of years ago,” he says. “They’ve always been the most likely candidates, but the reality is that if they come to market now, it’s a clear statement that they need cash, and that’s not a statement any of these firms want to make. It’s a chicken and egg problem.”

©2016 funds global mena

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