Re­gional mar­kets have seen many false dawns an­nounc­ing an ex­pected rush of share sales, but per­haps the con­di­tions are fi­nally right for ex­pec­ta­tions to be re­al­ized.


GULF mar­kets are braced for a wave of ini­tial pub­lic of­fer­ings (IPOs). I wish I’d had a dol­lar for ev­ery time I have read that, or in­deed writ­ten it. But — maybe, just maybe — this time the prospect of a rush to mar­ket by Gulf cor­po­rates will ac­tu­ally come to pass.

All the sig­nals are set to green. Global eq­uity mar­kets are at all time highs, there is still no sign of an im­mi­nent leap in in­ter­est rates to get global bond mar­kets soar­ing again, and as­set val­u­a­tions are at the kind of lev­els where own­ers must surely be tempted to cash in.

In the Gulf, eq­uity mar­kets have been pre­vented from join­ing in the global shares party by con­cerns about the eco­nomic ef­fect of the oil price — still the re­gion’s most im­por­tant in­di­ca­tor. But nei­ther have they col­lapsed. Eq­ui­ties have ac­tu­ally held value more than crude since the sum­mer of 2014.

The com­par­a­tively low oil price is ac­tu­ally one of the rea­sons Gulf mar­kets are se­ri­ously look­ing again at IPOs. Gov­ern­ments are look­ing to make up some of the fis­cal deficit caused by low oil; pri­vate cor­po­ra­tions are seek­ing to bridge the gap caused by lower oil-re­lated ac­tiv­ity. Pri­va­ti­za­tions and IPOs are good ways to do that.

Ap­petite for Gulf fixed-in­ter­est debt has been ex­tremely healthy, with Saudi Ara­bia tap­ping the mar­kets for $37 bil­lion in the past year. Other is­suers — most re­cently Abu Dhabi with a heav­ily over­sub­scribed $10 bil­lion bond sale — have also gone to in­ter­na­tional debt mar­kets.

But there is noth­ing like eq­uity as an ef­fi­cient way to raise cash. At the be­gin­ning of the year, it looked as though stock mar­kets here were set for lift off, with 10 IPOs rais­ing some $400 mil­lion, mainly in Saudi Ara­bia.

But this fell back in the sec­ond half, ac­cord­ing to re­cent fig­ures from ac­count­ing and con­sult­ing group PwC. From March to June, just three com­pa­nies — all from Saudi Ara­bia — raised $171 mil­lion on pub­lic eq­uity mak­ers. The third quar­ter just ended, tak­ing in the slow sum­mer months, is un­likely to show any im­prove­ment.

But, if spec­u­la­tion and “peo­ple fa­mil­iar with the sit­u­a­tion” are to be be­lieved, there are a num­ber of big IPOs in the pipe­line, with the UAE lead­ing the way. At least five stock mar­ket list­ings are said to be in the off­ing, some of them in the multi­bil­lion-dol­lar range.

The most ad­vanced is the planned list­ing of Emaar De­vel­op­ment, the UAE real es­tate arm of the coun­try’s best known de­vel­oper, which brought you the world’s tallest build­ing, the Burj Khal­ifa.

That could hap­pen as a soon as next month, with a sug­gested mar­ket cap­i­tal­iza­tion in the re­gion of $6 bil­lion and an IPO value of around $2 bil­lion. The cash will be used mainly to pay div­i­dends, with the govern­ment of Dubai a prime ben­e­fi­ciary from its 29 per­cent stake.

Emaar will be the largest Dubai IPO since 2014, when the same com­pany sold its malls busi­ness to raise $1.58 bil­lion, and could kick off a spurt of share ac­tiv­ity from UAE com­pa­nies. Abu Dhabi’s oil com­pany Ad­noc is con­sid­er­ing an IPO for its re­tail arm, and could also be look­ing at its ship­ping busi­ness as a mar­ket can­di­date.

Oth­ers that could fall into the bil­lion-dol­lar IPO cat­e­gory are the GEMS school busi­ness, Emi­rates Global Alu­minium and con­glom­er­ate Se­naat, though it is thought at least one of th­ese is look­ing to Lon­don as a venue over any UAE mar­ket.

If the UAE gets off the mark first, where does this leave the huge pro­gram of IPOs sched­uled in Saudi Ara­bia? Re­gional cor­po­rate fi­nanciers are pon­der­ing at the mo­ment whether it is bet­ter to wait for the “big one” — the planned $100 bil­lion IPO of Saudi Aramco — or to tap re­gional mar­kets while they still have some cash ahead of that record break­ing mar­ket de­but.

It prob­a­bly doesn’t mat­ter, be­cause Aramco is such a seis­mic event in world fi­nan­cial mar­kets that it will gen­er­ate its own global fi­nan­cial mo­men­tum.

More to the point for Saudi cor­po­rate ad­vis­ers is whether they hold off the first of an es­ti­mated $200 bil­lion of IPOs un­til af­ter next year’s de­lib­er­a­tions by the MSCI and the FTSE Rus­sel or­ga­ni­za­tions on up­grad­ing the King­dom to in­clu­sion in their in­dices.

It is likely that by next sum­mer the Tadawul will be in­cluded in both, which could be ex­pected to trig­ger a big in­flow of for­eign in­vest­ment funds. IPO can­di­dates might con­sider it de­sir­able to be in at the bot­tom be­fore than rush.

Which will be the first Saudi com­pany to test the IPO wa­ters? It is hard to say, with lit­er­ally hun­dreds lined up for sell-off. But pol­i­cy­mak­ers will prob­a­bly want to en­sure the first gets away pain­lessly, so ex­pect a solid, de­pend­able util­ity to be high up the list. A power gen­er­a­tor? A water de­sali­na­tion op­er­a­tor?

Those are ex­actly the kinds of busi­nesses that will form the back­bone of the Saudi pri­va­ti­za­tion pro­gram, and will surely be among the first wave.

Frank Kane is an award-win­ning busi­ness jour­nal­ist based in Dubai. He can be reached on Twit­ter @frankkane­dubai


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