The majority of GCC listings are failing – report

Just one third of initial public offerings (IPOs) in the GCC go on to become successful stocks, according to a recently published report.

The region enjoyed a renaissance last year in terms of the number of listings and expectations are high that there will be a number of deals coming to market in 2022. However, according to Dubai-based management consultant Iridium Advisors, this “spirit of rebirth and optimism in equity capital markets disguises an alarming fact – two out of three GCC listings do not succeed”.

Iridium’s report, ‘The Renaissance of IPOs in the GCC’, analysed 457 IPOs in the GCC region between 2005 and 2021.

It found that only 38% were priced successfully, whereby the difference between the offer price and the first-day closing price was less than 20%. Furthermore, only 32% of companies traded within a 20% range of the offer price within the first 30 trading days. In the first five years after listing, 69% of companies underperformed their country’s benchmark index.

Iridium’s report highlights three areas where companies must focus in order to turn the short-term success of an IPO’s opening week into a successful stock over the long-term.

The highlighted areas are the different dynamics between primary and secondary markets; the different market conditions before and after the IPO; and the importance of ongoing investor relations to attract long-term investment as opposed to public relations which are used to promote the IPO.

“With a well-thought-out programme of new public listings, which is already under way, the region has the opportunity to re-energise its capital markets and attract foreign capital to diversify economic growth,” says Oliver Schiltzmann, Iridium Advisors CEO.

“Nevertheless, there is still a big mountain to climb to unlock the true capital markets potential of listed companies for both issuers and investors.”

© 2022 funds global mena

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