Domestic IPOs in Saudi Arabia declined this year, with capital raised dropping 84 percent (from $6.4 billion in 2014 to $1 billion in 2015), while volume fell from five listings to three this year, states a report global law firm Baker & McKenzie. Europe, Middle East & Africa (EMEA) is the only region that showed growth in domestic deals global trends were reflected in countries such as the UAE, Saudi Arabia and Egypt, it stated.
After significantly outperforming domestic initial public offerings in both value and volume growth terms the past two years, cross-border deals slid back to just below 2013 levels in 2015, according to a Cross-Border IPO Index by Baker & McKenzie.
The index reveals that domestic and cross-border IPO activity across the world both fell this year, with potential issuers facing poor market performance, geopolitical uncertainty, low commodity prices and interest rate rises on the horizon. Trade sales often provided more certain and often higher valuations than an IPO, to the detriment of the equity capital markets.
Overall, cross-border IPOs raised $37.8 billion worldwide from Jan. 1 2015 to 10 Dec. 2015, down 53 percent from last year. Though to put that in context, cross-border deal values rose 98 percent in 2014 and 73 percent in 2013.
Cross-border volumes declined 32 percent to 128 deals after a 26 percent gain in 2014 and 58 percent increase in 2013. After a year of inactivity, there was only one cross-border listing by a UAE issuer the IPO of Orascom Construction Ltd, which debuted on the Egypt Stock Exchange and raise $185.01 million.
Cross-border IPO activity by Saudi Arabian issuers remained active for this year. This year saw the first cross-border IPOs by Egyptian issuers in the last five years. The two listings raised $ 558.14 million and were among the most notable cross-border IPOs across the EMEA region.
The $334 million IPO of Integrated Diagnostics Holding and the $264 million IPO of Edita Food Industries SAE were dual listed on the Egypt and London Stock Exchanges.
Notably, just three exchanges accounted for 93 percent of all cross-border IPOs in 2015 the Hong Kong Stock Exchange, Nasdaq and the London Stock Exchange with companies seeking to raise capital in deeper, better capitalized markets.
Nine of the 10 largest global cross-border deals were Chinese companies listing on the Hong Kong Stock Exchange. Globally, 2015 saw increased cross-border IPOs in the telecommunications, health care, financials and industrials sectors.
Domestic issuance fell 25 percent globally in 2015, but off the back of a rise of just 2 percent in 2014. Domestic volumes also fell, by 17 percent. However, domestic listings grew 7 percent by value in EMEA, the only region that showed growth in domestic deals.
There were no domestic listings in the UAE this year, in contrast to last year’s five listings that raised $ 2.91 billion. Egypt, on the other hand, tripled its domestic IPO activity with $360.3 million raised from three listings in 2015, in contrast with one IPO valued at $108.7 million in 2014.
“It has been a challenging year, with high volatility, low commodity prices and macro uncertainty likely to continue to have an impact on the markets in 2016 before cross-border offerings pick up again,” commented Karim Nassar, head of capital markets at Baker & McKenzie’s associated firm in Riyadh.
Mazen Boustany, head of banking and finance at Baker & McKenzie Habib Al-Mulla, based in Dubai, said: “Next quarter’ was the theme of 2015 as IPOs kept being pushed back throughout the year, and banks across the Middle East are bracing for more challenges in 2016.”
He added: “With diversification accelerating across the GCC in an effort to reduce the impact of oil price volatility, and with new commercial and financial regulations being implemented in the region, there is hope for future cross-border capital flows.”
