Middle East IPO train rolls on

Image: Lindsey Bailey/Axios

The Middle East IPO boom isn’t slowing down as a new breed of companies – some of which were announced just this week – plan to go public soon.

Why it matters: This is in stark contrast to the IPO window in the US and Europe, both of which were closed for most of the year. That even forced the once determined Instacart and others to push back the listings.

The big picture: According to Rudy Saadi, Citigroup’s head of MENA Equity Capital Markets, the current spate of new listings is the result of several factors:

• a historic underinvestment in the region;
• governments’ desire to diversify their economies;
• regulatory changes welcoming foreign investors;
• Currencies tied to the US (and therefore more stable);
• strong GDP growth;
• and inflation lower than in the US and Europe.

Saadi also notes payments firm Network International’s decision to go public in London in 2019, becoming the last major company in Dubai to go overseas. Since then, the emirate’s regulators have made its exchange more attractive to local businesses, as have Abu Dhabi and Saudi Arabia. Using the numbers: Since the beginning of 2022, 45 companies have gone public on the region’s bourses, raising $17.6 billion in revenue, according to Refinitiv data as of Nov. 24.

• This is a 62% increase from 2021 IPO proceeds.

Between the lines: Much of the current wave of IPOs in the Middle East has been to privatize state-owned companies and government-related entities. The next phase is expected to come from large family businesses looking to liquidate some of their properties, Saadi tells Axios.

• He also expects some local tech companies to go public.

• However, their current lack of earnings as a growth-stage company means they have to work, even with the support of regulators (some of whom won’t allow unprofitable listings), to at least be profitable on an EBITDA basis and attract investors to the region around them more familiar with its growth trajectory and ability to deliver dividends over the long term.

Yes but: Everything was not rosy.

• For example, most of the newly listed companies on the Dubai Stock Exchange are now trading below the IPO price, Bloomberg noted earlier this week.

The bottom line: “We’re already in December… and we’re still launching IPOs,” Saadi says. “It won’t pause – you may see slower output [next year] – but it doesn’t stop.”