Initial public offerings plunge in Gulf region: PwC

Muscat: Share offerings of Gulf companies in the second quarter of 2016 plunged by 42 per cent to $274 million, compared to the previous quarter.
The first regional offerings in the second quarter of 2016 was by Al Yamamah Steel Industries that owns and operates steel plant factories, which offered 15.24 million shares to the public to raise $147 million, according to a report released by PricewaterhouseCoopers (PwC).
The second offering was by L’azurde Company for Jewellery, which designs, manufactures and distributes precious metals in the Mena region, which offered 12.9 million shares to the public to raise$127 million. Both companies are listed on the Saudi Stock Exchange, Tadawul.
The share offerings in the Gulf Cooperation Council (GCC) region in the second quarter remained low as oil prices and global economic volatility, regional political unrest as well as the recent UK vote on the referendum to leave the European Union (EU), Brexit, continued to bring uncertainty to GCC markets.
Looking at IPO performance in the second quarter of 2016, compared to the same period in the prior year, the number of IPOs declined by half and the total proceeds raised in the first quarter of 2016 and were approximately four times less as compared to the second quarter of 2015.
Furthermore, IPO activity in the first half of 2016 declined compared to the first half of 2015, with total proceeds raised of $745 million via 3 deals, compared to $1.3 billion via 5 deals. The Tadawul has been the only active market in the first half of 2016, albeit with relatively low volumes.
“While uncertainties with oil prices remain and regional geopolitics continue to play out, we would expect to see continued volatility in regional equity markets. Valuations tend to fluctuate significantly in times of uncertainty and investors tend to stay out of equities. Any significant IPO activity we see in the short to medium term is therefore likely to be government sponsored,” said Steve Drake, head of PwC’s Capital Markets and Accounting Advisory Services team in PwC Middle East.
Global IPO issuance experienced a slowdown in the first half of 2016, compared to the same period of 2015. Nonetheless, activity in the second quarter was higher than in the first quarter of 2016. Easing measures from the European Central Bank and Bank of Japan remain in place, while the US Federal Reserve is now expected to raise interest rates at a slower pace. Together with a recovery of oil prices, a fall in volatility and improving economic indicators, investors were notably more upbeat than in the first quarter.
The amount of financing raised through global IPOs fell by 49 per cent in the second quarter of 2016 compared to the same period of last year. Global IPO money raised stood at US$34.5 billion via 241 deals in the second quarter of 2016, compared to $67.3 billion via 416 deals in the second quarter of 2015.
Financial services issuers were again the most active in the second quarter of 2016, raising $11.9 billion from 51 IPOs, representing 38 per cent of proceeds on year to date basis.