In the post-pandemic era, GCC IPOs have come under the spotlight due to their steady uptick and resilience despite the global economic headwinds. The current IPO wave in the GCC region has been driven by a confluence of multiple factors that include initiatives by GCC governments to diversify the economy. These factors include listing of state-owned entities, favourable regulatory reforms and rising foreign investor interest in GCC markets. The pipeline of GCC IPOs remains strong owing to the recovery of economic growth, expectations of rate cuts in 2025, and improving visibility among foreign investors. However, global IPO activity, in contrast to the GCC, has remained subdued during the same period, influenced by high interest rates, persistent inflation, and concerns about a potential global recession.
Cautious Optimism in the Global IPO Market
The global IPO market is showing signs of rebound in 2024 amid monetary easing, geopolitical uncertainty and market volatility. In the first three quarters of 2024, the Americas and EMEIA (Europe, Middle East, India and Africa) have witnessed double-digit growth in both IPO volume and proceeds compared to the same period last year. Following a pause in Asia Pacific IPO activity in H1 2024, the region has made a notable shift in Q3 2024 recording a 11% q/q increase in the number of IPOs.
Rebound in private equity (PE) and venture capital (VC) backed IPOs and cross-border listings emerged as notable themes in global IPO issuances in the first nine months of 2024. PE and VC-backed IPOs constituted six of the top 10 global IPOs and accounted for over one-third of the total global IPO proceeds in the first three quarters of 2024.
The GCC IPO Wave – Energy Sector Dominates
The GCC IPO market has witnessed strong growth over the past five years, except for a dip during the pandemic. This growth was largely driven by the landmark 2019 Saudi Aramco IPO, which served as a key milestone for primary market listings in the region. Saudi Aramco raised nearly USD 26 billion and set the record to become the world’s biggest IPO till date. The diversification agendas of the GCC countries, listing of state-owned entities coupled with broader economic stability and investor interest further underpinned the rise in IPO activity. In the first nine months of 2024. The GCC region witnessed 27 IPOs with proceeds amounting to USD 4.7 billion, compared to 28 IPOs with proceeds of USD 5.6 billion during the same period in 2023. Among GCC markets, Saudi Arabia and UAE were the most active, accounting for 56.8% and 34.5% of the total proceeds raised between 2019 to Q3 2024, respectively.
In terms of the broader sectoral trends in the GCC region, energy and utilities remain the dominant sector representing roughly 61% of the total IPO value between 2019 and Q3 2024 driven by the listing of Saudi Aramco and Dubai Electricity & Water Authority (DEWA). Notably, excluding Saudi Aramco’s IPO proceeds, energy and utilities sectors still dominate the GCC IPO value with a share of 24% closely followed by consumer goods sector (22.3%). However, consumer goods sector leads in terms of the number of IPOs, constituting roughly 12% of the IPO volumes, in the GCC region during the period.
1-year Post IPO Performance of Top 10 IPOs in GCC by Proceeds (2019-Q3 2023)
The one-year post-listing performance of the top 10 IPOs by value in the region during 2019-Q3 2023 has mostly been positive. ACWA Power, listed in October 2021 and the eighth largest IPO by proceeds, registered 122.8% increase in share price in one year following the day of listing. However, S&P GCC composite index gained a marginal 1% during the same period indicating the robust performance of the listed entity despite subdued performance of the broader equity index. ADNOC Gas, Americana Restaurants International and Nahdi Medical Company were among the few IPOs that recorded positive performance in the following one year of listing during a period when the broader equity market index ended negative. Dubai Electricity & Water Authority (DEWA) and Borouge shares yielded negative returns in one year following the date of listing. However, both companies were listed in 2022, and the negative market sentiment is likely to have impacted their performance.
Saudi Arabia and UAE IPOs Attract Investor Interest
UAE and Saudi Arabia dominate the IPO market in the GCC region, driven by the economic diversification strategies that increased their market appeal and growing focus on small and medium-sized enterprises (SMEs) listings. Both countries accounted for 91.3% of the GCC IPO proceeds during 2019-Q3 2024 and their trajectory is expected to continue. Saudi Arabia's Parallel Market Nomu provides a platform for smaller companies to raise capital with fewer regulatory requirements compared to the main market. The two countries are improving regulatory frameworks, simplifying compliance procedures, and offering incentives to encourage SME listings. Moreover, government initiatives are being implemented to provide financial aid and advisory support to SMEs aiming to pursue IPOs.
The positive momentum in the countries’ IPO issuances could be primarily attributed to the economic diversification and long-term initiatives of the GCC countries necessitating large investment and infrastructure spending that led to the listing of state-owned entities. For instance, government-backed Saudi Aramco’s IPOs is one of the largest in the GCC, raising a record USD 25.6 billion through the sale of 3 billion shares. The shares represent only 1.5% of the company value, with Saudi government retaining controlling majority of shares. The listing was aimed at securing funding for national transformation projects of Saudi Arabia to reduce its reliance on oil revenues.
Drivers Behind the IPO Boom in the GCC Market
Recent regulatory reforms in the GCC region have fuelled the IPO boom from private companies. Regulatory developments by the GCC stock exchanges in the last decade such as the launch of ‘The IPO Accelerator Program’ by Dubai Financial Market (DFM) and Dubai Chamber of Commerce in 2023 support family businesses and private companies to pursue IPO opportunities. Saudi stock exchange Tadawul launched parallel equity market Nomu in 2017 to facilitate listing of SMEs with lighter listing requirements. The introduction of ‘The Abu Dhabi IPO Fund’ (ADIPOF) is a government initiative to enable private enterprises listing on ADX through financial assistance and expert advice. Lowering listing fees, encouraging listing of family businesses, and easing access to IPOs through collaborations with global investment platforms incentivise private companies to go public. Initiatives to attract foreign investor interest, such as lower trading commissions, extending trading hours, introduction of new investment products such as ETFs to improve the competitiveness of regional stock exchanges have further improved business confidence.
The uptrend in GCC IPO activity also stems from stronger macroeconomic fundamentals, rising business interest and investor appetite. Business enthusiasm in going public is further contributing to the uptrend amid favourable policy reforms and positive economic outlook. Successful IPOs are seen to have a contagion effect with healthy pipeline of companies for the IPO. For instance, Kuwait’s first listed family business Ali Alghanim and Sons was oversubscribed by 11 times at the time of its IPO in 2022. This has been followed by listing of another family business, Beyout Investment Group in 2024, which was oversubscribed by 17 times. Alike, investor demand remains strong supported by positive post IPO performance, strong non-oil economic growth outlook and policy environment.
The GCC IPO pipeline remains solid, with companies from diverse sectors preparing for their forthcoming public offerings. The post-IPO performance of major IPOs also remains strong, building a solid case for further listings. AlAbraaj Restaurants Group (Bahrain), Etihad Airways (UAE), Tamkeen Human Resources Company (Saudi Arabia) are few IPO prospects in the near term. While GCC IPO activity remains concentrated in Saudi Arabia and UAE, other GCC markets also have strong potential with some firms looking at cross border listing in other GCC markets. A few family businesses in Kuwait are reportedly looking to list their business in the domestic market. Bahrain Bourse’s plans to boost listing of government entities, along with Oman OQ’s plans to list two more companies in 2024 also provide a positive outlook for IPOs in the region.
The GCC IPO market is expected to continue its momentum in 2025. The region’s central banks have kickstarted their monetary easing cycle in tandem with the U.S Fed. Further rate cuts in 2025 could make market conditions ripe for further listings. Lower rates reduce the cost of capital, making it more attractive for companies to raise funds. Foreign investor interest in the GCC region is on the rise, with overseas investors accounting for 43% of registered investors on the Abu Dhabi Exchange and 3,700 qualified foreign investors in Saudi Arabia. Additionally, over half of Saudi Aramco’s shares taken up by foreign investors in its secondary offering in June 2024. A favourable macroeconomic environment, supportive initiatives from governments and stock exchanges coupled with regional opportunities have contributed to a positive outlook for regional IPOs.