Dubai: The UAE’s pipeline for initial public offerings got off to a strong start on Monday, the opening day of the MENA IPO Summit, where government entities and private companies expressed a keen interest in selling equity while there remains a strong interest in the region.
The UAE, especially Dubai, dominated global IPOs in 2022, fetching 23 per cent ($21 billion) of the $91 billion raised in all IPOs worldwide over the year.
Hamed Ali, the CEO of Dubai Financial Market, said the emirate’s market this year has the potential to surpass last year’s IPO performance as regional businesses, which earlier considered international listings, are shifting their attention towards the region. Day one of the three-day summit also heard from several regional and international experts and issuers who said it is the right time for private, family-owned businesses and small and medium enterprises to list and raise funds for growth and develop financial resilience.
“The government has played a fundamental role in shaping the economy and serves as a compass for investors to invest in Dubai’s equity stories”, Shaikha Almarri, Head of Government and Corporate Dubai, HSBC. She said: “The momentum from 2022 is expected to continue in 2023. By listing Dubai’s crown jewels like DEWA, Dubai is showing the world that the emirate and DFM are open to IPOs of any size.”
What makes Dubai a hotspot for IPOs?
But what makes Dubai a popular IPO destination even as listings dwindle in London, Hong Kong and New York? Ibrahim Al Haddad, the CEO of Salik Company PJSC, one of the emirate’s biggest IPO success stories, said Dubai’s attractiveness as an investment and business hub is mainly due to the political and economic stability it provides residents and potential investors. Dubai’s toll operator raised over Dh3.7 billion from its IPO on the DFM. The IPO was over oversubscribed 49 times across all tranches, with total gross demand at Dh184.2 billion.
“Much of that (demand) came from domestic and international sources. The required size of the IPO was Dh3.7 billion, and 16 per cent of that was from international investors,” said Al Haddad while speaking at a panel discussion at the summit.
He said: “Dubai’s GDP grew 4.6 per cent year-on-year to reach Dh307.5 billion during the first nine months of 2022, compared with the same period last year. We have seen the impact of that in our IPO experience,” said Al Haddad. The impact of these factors was seen in investments during Salik’s pre- and post-IPO phases.
Moreover, talented professionals from across the world are now choosing Dubai as their home, said Helal Saeed Al Marri, Director-General of the Dubai Department of Economy and Tourism. He added: “Family businesses, high net-worth individuals, global technology giants and Web3.0 also moving to Dubai. Overall, along with the progress of the capital market, we did very well. We definitely have a good base for 2023.”
Ali Khalpey, CEO of EFG Hermes Frontier, said Dubai has all the building blocks for companies to come to market, including solid governance. “The capital markets are functioning efficiently, which will result in more IPOs in the short term, especially from firms looking to grow their business,” he explained.
Dubai’s IPO success story
Last year, UAE’s financial markets witnessed 11 IPOs, which raised Dh51.2 billion, enhancing their investment potential and attracting a new segment of investors. Dubai’s IPO activity levels were exceptionally high, with listings from state-owned entities DEWA, Salik, Empower and Tecom. Schools operator Taleem listed its shares, too. The emirate accounted for 40 per cent of IPO activity in the Gulf region last year, representing Dh673 billion.
During a panel discussion, CEOs from four UAE organisations that went public last year discussed the challenges and successes they faced during their IPO journey. Robust planning, a dedicated legal advisor and a clear governance strategy are required to ensure success during a company’s IPO journey. Abdulla Belhoul, the CEO of Tecom, said: “Having a dedicated team and the right legal advisor committed to the timeline of the IPO helps maintain business as usual while pursuing the IPO journey.”
Meanwhile, Thomas Varghese, the CFO of DEWA, said that the CEO’s track record, the company’s vision, financial valuation, and legal frameworks are deciding factors for investors ahead of investing in a company. The utility’s listing was the largest GCC IPO last year, raising $6.1 billion. Alan Williamson, the CEO of Taaleem, said: “Planning is important, and a strong business foundation is required. However, listing on the DFM is possible within a reasonable timeframe.” The school group raised $205 million from its listing in November.
Dubai is ready for more stock listings – including the private sector
The emirate is ready for more IPO listings from state-owned and private enterprises, driven partly by the recently launched Dubai Economic Agenda (D33) goals.
After a flurry of IPO activity in 2022 amid strong investor demand and as economies rebound quicker from the pandemic-induced slowdown, 2023 could also be the year where international firms consider Dubai listings, a top UAE banker has said.
Mohammad Al Bastaki, CEO of Emirates NBD Capital, said he is confident international companies will also be listing on the Dubai bourse soon. While he did not share timelines for when this would begin, Dubai’s robust logistics capabilities and the access the emirate has to great talent will drive international firms to seek local listings.
“Despite the many challenges faced, we saw robust GDP growth and several other positive indicators, including growth in trade and tourism sectors,” said Helal Saeed Al Marri, Director-General of the Dubai Department of Economy and Tourism. “Ultimately, the majority of the progress in any economy comes from growth within the private sector. However, the government still plays a role, and Dubai has defined several projects to aid this growth.”
Al Marri said the D33 had set a clear roadmap for companies and investors. He added that Dubai is one of the few cities in the region helping companies accelerate their growth from SMEs to large-scale companies by giving them easy access to capital markets.
DFM’s target - as part of D33 - is to identify 400 high-potential companies to support the capacity-building capabilities of SMEs and help them develop into global brands.