Business | Markets
Channel Sponsor
IPOs in the Middle East register sharp decline
Initial Public Offering activity in the Middle East has declined by 99.6 per cent in October and November of last year, reflecting the investor sentiment and the global economic downturn, according to Ernst and Young's year-end IPO update.
- By Nadia Saleem, Staff Reporter
- Published: 23:35 January 4, 2009
- According to Ernst and Young, drop in regional offerings in October-November 2008 indicative of investor sentiment.
- Image Credit: Gulf News Archive
Dubai: Initial Public Offering (IPO) activity in the Middle East has declined by 99.6 per cent in October and November of last year, reflecting the investor sentiment and the global economic downturn, according to Ernst and Young's year-end IPO update.
Regional IPOs in the two months raised a total of $22.4 million (Dh82.2 million) from 3 IPOs compared to $6 billion (Dh22 billion) raised from 10 IPOs in the same period the previous year.
During 2008, Saudi Arabia, the UAE and Egypt were the top three markets in terms of capital raised accounting for 78 per cent, 10.3 per cent and 4.7 per cent respectively.
"Though the $13.4 billion (Dh49.178 billion) raised through 55 IPOs during January to November was 4.6 per cent higher than the $12.8 billion (Dh46.9 billion) raised in all of 2007, the drop in activity in the last two months is the result of current investor sentiment and the effect of the global financial crisis on regional markets," said Phil Gandier, partner, transaction advisory services at Ernst and Young, Middle East.
He said that issuers were not willing to accept current market valuations and therefore scheduled IPOs coming to the markets were being delayed. "Nevertheless, companies are preparing for IPOs because the long-term strategic rationale for such transactions has not changed," Gandier added.
Azhar Zafar, head of mergers and acquisitions at Ernst and Young, Middle East, added: "Investor confidence and willingness to list have clearly been affected by current market conditions. Despite the drop in listings, the pipeline of companies preparing for IPOs remains robust."
He added, "outperforming companies start preparing to list a full 12 to 24 months before actually going public."
Robert Mckinnon, managing director of Al Mal Capital, a research and consultancy firm, told Gulf News that he expected investor interest to pick up by the second half of this year.
"Once the markets calm down and there is a little more certainty around the global economic outlook, we may see a few IPOs towards the end of this year."
He added there were a lot of potential IPOs in the real estate and construction sectors. "Since the sector has seen a bit slow in recent months, there are several potential and planned IPOs in development companies that are either delayed temporarily or cancelled all together," McKinnon said.
If companies need to raise capital right now, they need to go to the private equity market, that offer attractive evaluation, he added, explaining that IPO focus for the last three years has been of opportunistic exit.
"Instead of looking to raise money from private equity or strategic partners that were going to add value to the business, it had been about making a profit from taking the company public," Mckinnon said, stating that the approach had to change as there was no investor interest.
Global IPO activity has more than halved since 2007.
During the first 11 months of 2008, a total of 745 IPOs worldwide raised $95.3 billion (Dh349.7 billion) in capital. This compares with 1,790 IPOs over the same period in 2007, which raised $256.9 billion (Dh 942.8 billion) in capital.
Share this article
More from Markets
More from Business
Popular in Business
-
Budget travel
Airlines in the region
Take a pictorial look at some of the budget airlines in GCC
Business Editor's choice
-
Cafe Nero's premium coffee blends
UK chain plans to open 50 outlets in region following UAE launch
-
Emirates to fly direct to Tokyo
Airline considers code-share deal with JAL after adding second destination in Japan
-
Work on world's longest sea crossing
The proposed Qatar-Bahrain causeway project is estimated to cost Dh9.9 billion
