GULF IPO Outlook Depends On Oil Prices, Secondary Markets

The outlook for initial public offerings (IPOs) in the Gulf Cooperation Council (GCC) region in 2024 will hinge significantly on the stability of secondary equity markets and oil prices. Despite this, GCC sovereigns are expected to continue supporting the non-oil economy through robust budget spending, according to Kamco Research.

As the region navigates 2024, issuers are anticipated to closely monitor the performance of secondary markets and evaluate whether alternative funding routes, such as debt markets, could be more advantageous. Kamco Research highlights that the performance of IPOs will be influenced by these factors, with particular attention to the stability and liquidity of secondary markets.

Real Estate Investment Trusts (REITs) are projected to experience a decline in IPO volumes due to ongoing structural issues affecting real estate demand and narrowing spreads between REIT returns and safer time deposits. Despite this, GCC companies with distinctive business models, efficient capital management, and strong industry positioning are likely to attract both local and international investor interest.

In 2023, GCC IPO activity showed a notable resurgence, with a record number of IPOs and increased capital raised compared to previous years. For instance, the total number of IPOs in the region rose to 25, up from 18 in 2018, marking a significant rebound from the lower volumes seen in 2015 and 2016. Capital raised via IPOs surged to $3.2 billion, reflecting a robust market appetite.

The participation of issuers across all GCC countries has been widespread, with notable successes such as Qatar Aluminium Manufacturing Company, which saw a 33.5% gain from its offer price by the end of 2023, despite initial volatility. The GCC IPO market has thus demonstrated resilience and adaptability, even amid fluctuations in global equity markets and oil prices.

Globally, IPO activity in 2023 saw a 15% increase year-on-year, with 1,563 IPOs raising $235 billion, according to Ernst & Young (EY). This growth was driven by several high-profile listings and mega IPOs, contrasting with the previous year’s mixed performance due to trade tensions and geopolitical uncertainties.

In summary, the GCC IPO market in 2024 is poised for growth, supported by strategic governmental spending and a diversified economic landscape. While challenges remain, particularly in real estate and secondary market stability, the region’s IPO landscape continues to evolve with promising opportunities for innovative and capital-efficient companies.