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Abu Dhabi, UAEMonday 24 September 2018

IPO resurgence welcome

Companies look to expand and family businesses look to evolve

The global financial crisis slammed the brakes on companies going public globally and regionally. In the UAE, there was hope that a rebound was underway as the Dubai economy began to show signs of a recovery in 2013.

The listing of two companies in the UAE in 2014 drew tremendous interest from investors, who had shunned equities after the meltdown in the United States and its reverberations globally and in the region, with offerings being oversubscribed at the time between 36 and 65 times.

That uptick in interest was unfortunately short-lived and a 2015 market correction in China, the world’s second largest economy, wiped out US$5 billion from its equity market, sending shock waves globally.

Despite the sluggish characterisation of the investment climate, there are encouraging signs globally and regionally that investors have warmed up to a resurgence of IPOs.

Over the past two quarters and in recent weeks, the US has seen a flurry of listings, the most in the country in two years. After Snap’s offering, Altice USA, a cable company, raised $1.9bn in the second-biggest US IPO of the year. Though shares of other companies that have listed have subsequently traded below their IPO price, generally the market appears healthy.

According to Renaissance Capital, a consultancy that focuses on public offerings, the US recorded 54 IPOs in the second quarter of the year raising $11bn, a two-year record high.

Though Arab markets year-to-date are mixed in performance, oil is hovering in the mid $40s a barrel, about 15 per cent down year-to-date, there is nonetheless room for optimism.

The emergence of parallel market Nomu has been a boon to small caps in Saudi Arabia with a handful of companies listing. As Dania Saadi reports, the Dubai Financial Market anticipates at least two public offerings by the end of 2018, according to the exchange.

As companies look to expand and family businesses look to evolve, tapping markets for liquidity is increasingly becoming attractive even though investor appetite may still be uncertain. The 5 per cent listing of Saudi Arabia’s Aramco in 2018, which is expected to raise more than $100bn has put the region back on the map of institutional and private investors.

That behemoth may very well prove to be the bellwether investors are waiting for.

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