GCC IPO market poised for recovery: Experts

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GCC: ICAEW members and guests gathered in Dubai to discuss whether there had ever been a better time for IPOs in the region.

Panellists included Fahima Al Bastaki, Executive vice-president and head of business development, Dubai Financial Market; Hassan Hijazy, senior vice-president, investment banking; Andrew Tarbuck, Partner, Hogan Lovells; and Umar Saleem, group cfo, Al Jaber Group. The discussion was moderated by Gregory Hughes, Partner, MENA IPO leader, EY.

Speakers indicated that this positive sentiment is expected to continue in near future, especially in the run-up to the milestone launch of $2trn Saudi Aramco offering which is set to be the world’s largest. Government initiatives across the region, including large scale privatisation activity, are also expected to boost capital markets activity in the next couple of years.

Panellists advised there is a shift in thinking for regional companies when it comes to choosing stock exchange for IPOs. In the past, regional companies were going to foreign jurisdictions to issue IPOs but this is not the case now. Companies have realised that there is a lot of money in the region and that local exchanges are robust enough to attract foreign investors.

Michael Armstrong, FCA and ICAEW regional director for the Middle East, Africa and South Asia (MEASA), said: “Rising numbers of IPOs can have a significantly positive effect on business growth and international networks. As oil prices recover and governments continue their diversification efforts, the IPO market in the region will continue to gain momentum.”

Speakers agreed that IPOs issued across the region are still in traditional industry sectors including commodities, energy and real estate. But they are expecting more startups to issue IPOs in the future.

When it comes to the reasons why some IPOs fail, panellists advised that the main reason is the lack of education in this field. Companies have high valuation expectations and they expect the process to be completed in a short time period, which is not always the case.

Speakers advised that companies should consider the following when planning to issue IPOs: be patient and flexible, understand the costs associated with IPO, ensure they have the right company structure in place before starting the IPO process, deliver financial reporting on time, have robust corporate governance in place and performance of similar stock in the secondary market where the IPO is issued.

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