Muscat: Fourth quarter of 2015 echoed the sluggish initial public offering (IPO) performance in the third quarter proving that the year was a volatile year for IPOs in the Gulf Cooperation Council (GCC), according to PwC Middle East Capital Markets and Accounting Advisory Services team.
The theme of uncertainty and negative market sentiment materialised in the second half of 2015 on the back of fluctuations in oil prices and ongoing regional and global political and economic instability, the PwC note said.
Saudi Arabia witnessed the only IPO in the fourth quarter of 2015 by Alandalus Property which raised $101 million from the deal. The IPO was oversubscribed and marked the first real estate sector offering on the Saudi Stock Exchange in five years.
The third quarter of 2015 saw no IPOs, while the second quarter proved to be the strongest quarter in terms of the number of offerings (4) and the money raised ($1.2 billion). Looking at IPO performance in the fourth quarter of 2015 compared to the same period in 2014, the number and money raised was considerably higher in the prior year with $7.3 billion from a total of 5 floats, mainly driven by the largest IPO in the GCC in 2014 by National Commercial Bank.
With there were no IPOs in the third quarter of 2015, the total money raised in the second half of 2015 was $101 million from one offering while $1.3 billion was raised from 5 IPOs in the first half driven by a stronger second quarter performance during the year. In terms of performance in the second half of 2015 compared to the prior year, a total of 7 IPOs raised $8.9 billion in the second half of 2014. Therefore, in many ways the fourth quarter of 2015 was a disappointing quarter for IPO performance.
Total proceeds in 2015 stood at $1.4 billion from 6 deals compared to $10.8 billion raised from 16 deals in 2014, $702 million from 9 deals in 2013, $1.7 billion from 9 deals in 2012, $789 million from 9 deals in 2011 and $2 billion from 12 deals in 2010, proving that although 2015 was the lowest year in terms of number of offerings over the past 5 years, the total value of offerings improved. Furthermore in the same period, excluding 2014, the average offering value of IPOs in 2015 was the highest. The Saudi Ground Services offering back in June marked the largest IPO during 2015 raising $752 million.
In the GCC, Saudi Arabia dominated the IPO market in 2015 in terms of number of offerings (6) accounting for 67 per cent of the total proceeds raised ($1.1 billion), accounting for 77 per cent of the total. The two other offerings were in Oman by Phoenix Power and on Nasdaq Dubai, United Arab Emirates by Orascom Construction.
Steven Drake, head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East said: “The theme throughout 2015 has been fluctuation in oil prices, regional political instability and global economic downturn, which we have seen has impacted the Gulf’s IPO market via decline in valuations, negative investor sentiment, and more so in the second half of the year where there was only one listing in six months.
“Over the past couple of years we were accustomed to seeing successful IPOs and an active capital market during the fourth quarter. However, the continued uncertainty has caused investors to become even more cautious with equities as an investment class thus losing confidence in the market resulting in issuers postponing any plans to go to market,” he added.
“The outlook for 2016 remains uncertain and until the factors mentioned begin to recover, it will be difficult for investors and issuers to regain confidence and come back to the market. There are many strong regional fundamentals however and so we hope markets recover in 2016 as many companies are now preparing and waiting for the right time to IPO,” he explained.
Debt market activity in the GCC in the fourth quarter of Q4 2015 continued to be muted mirroring performance in the previous quarter and underlying the recurring theme witnessed in the equity markets.