MENA IPOs raise US$218.9 Mn in Q3’11, up by 23.6%

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CORONAVIRUS IMPACT

  • Two IPOs in the region – both in Saudi Arabia
  • Global IPO activity down 50% in Q3’11 as compared to Q3’10
  • Asian issuers continue to dominate global IPO activity in Q3’11

According to Ernst & Young’s Q3’11 MENA IPO Update, regional capital markets raised US$218.9 million in the third quarter of 2011, up by 23.6% from the US$177.04 million raised during the same period in 2010, but down 39% from the US$335.05 million raised in the previous quarter.

The sole country in the region to witness any IPO activity in Q3’11 was Saudi Arabia with two listings on the Tadawul. United Wire Factories of Saudi Arabia (US$88.3 million) was listed in August 2011 and Hail Cement Company (US$130.5 million) was listed in September 2011.


Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young says: “The listings in Saudi Arabia are an exception to the lack of IPO activity in the key MENA capital markets. Investors in the region are still uncertain of what fair value is due to the follow-on effect of the EU debt crisis and the slowdown in the US. This is increasingly becoming true for almost all asset classes, including equity and IPO pricing.”

“Companies have had to postpone going to market since 2009 and will continue to do so this year. Investors are again looking for safety as uncertainty is set to continue in the fourth quarter. Predictions of listings, even in the low single digits, may not necessarily hold for the next quarter, however the pipeline of companies waiting for their IPOs is building up,” Phil added.

Global IPO activity down 57% in Q3

Global IPO activity has fallen sharply in Q3’11. So far this quarter, a total of 284 deals raised US$28.5 billion, this compares with 383 IPOs worth US$65.6 billion for Q2’11 (a 26% decrease in number and 57% drop in capital raised).

Whereas in Q3’10, there was 302 IPOs which raised US$52.5 billion (a 6% drop in number and a 46% decrease in capital raised compared to Q3 2011). This quarter globally, only 3 deals raised over US$1 billion. Average deal size decreased in many markets in Q3’11 compared to Q2’11. The global average deal size was US$100 million in Q3’11, compared to Q2’11 (US$171 million).

Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young comments: “The third quarter results show that the Eurozone and US debt crisis have had a deep impact on the IPO market and on both issuers and investors’ confidence. There are, however, many very good businesses still waiting to go public. Companies have not stopped seeing IPOs as a way of raising capital. They are waiting for markets conditions to improve, while continuing to prepare for their IPO.”

Asia continues to dominate IPO activity but is losing momentum

Asian issuers continue to dominate IPO activity in Q3 with 138 deals, which raised US$13.5 billion altogether (47% of global funds raised). However, this is the lowest level of capital raised by Asian issuers since Q2’09 (US$3.0 billion in 44 deals). European issuers completed 69 deals, which raised US$8.8 billion (31% of global funds raised), this was significantly less than Q2’11 (US$21.7 billion in 96 deals). Q3’11 activity remains higher than Q1’11 with US$2.4 billion raised 52 deals. North American issuers raised US$4.5 billion in 41 deals (16% of global funds raised) compared with US$11.6 billion raised with 55 deals in Q2’11 (18%).

Future global outlook

“Asia will continue to lead global IPO activity as domestic and foreign IPO pipeline builds. As soon as the market stabilizes, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally. The dominant trend in Europe’s IPO markets will continue to be state-owned enterprises. We have seen recently examples of European countries taking SOEs public. Governments need to act quickly to help lower market volatility and restore investor confidence for the IPO market to recover,” concludes Pinelli.[mpoverlay][/mpoverlay]

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