Technology, healthcare, transport, and retail firms in the public and private sector are expected to announce initial public offerings (IPOs) this year, experts told Arabian Business, as the IPO frenzy that has gripped Gulf markets over the past couple of years shows no signs of slowing down.
Economic diversification strategies in the UAE and Saudi Arabia, coupled with increasing investor appetite are fuelling an enduring rush of stock market listings across sectors.
After a tremendous year for the Gulf in 2022, which saw 48 IPOs raise a total of over $22 billion, another 47 companies went public last year though proceeds dropped to around $10 billion, experts said.
The first quarter of this year saw 10 IPOs raise $1.2 billion, all in Saudi Arabia and the UAE – a sustained pace that bodes well for continued momentum this year and possibly beyond.
“We definitely see a continuation of momentum in terms of volume and expect this to continue,” said Muhammad Hassan, Middle East Capital Markets Leader at PwC Middle East.
“The momentum for IPOs is likely to continue, attracting more companies to seek public listings to raise capital and expand their operations,” said Javier Herrera, Partner, and Martin Pavlica Principal at the Transactions and Transformations Practice at Kearney Middle East and Africa.
With startup unicorns and large family businesses increasingly seeking stock market exits, companies spanning sectors like technology, healthcare, retail, and renewables are among the prime candidates to go public over the next 12-24 months.
“We can definitely expect more companies to go public in the Middle East in the short term,” said Herrera.
Among the firms that have announced plans for an IPO in the UAE or Saudi is supermarket chain operator LuLu Group International, which is reportedly gearing up for a potential dual listing in Abu Dhabi and Riyadh. UAE-based edtech company Alef Education has already tapped banks to advise on its planned IPO on the Abu Dhabi Securities Exchange.
The long-awaited public listing of Etihad Airways, which could become the first by a Gulf airline, may also take place by the end of this year, according to reports.
In Saudi Arabia, companies across sectors like energy, materials, commercial services, transportation, consumer services, food and beverages, healthcare, financial services, software, and real estate have announced IPO intentions at various stages.
This includes firms such as Expertise in the energy sector, United International Holding in materials, SIRC in commercial services, Saudi Global Ports and Flynas in transportation, Foodics, Panda Retail, and Nice One in consumer services, ARASCO in food and beverages, NUPCO in healthcare, Riyad Capital, GFH, Al Othaim Investment, Tabby, and Tas’heel in financial services, Riyadh Dynamics and Nana in software, as well as MGC and Red Sea Global in real estate development.
“We continue to see large family businesses in KSA approaching equity markets, in addition to the privatisation wave and assets held in sovereign wealth funds,” Hassan said of Saudi Arabia’s pipeline.
“In the UAE there’s a blend of government and quasi-government companies joining the public markets. We’re also starting to see large privately held businesses in consumer markets follow suit. The startup [or] unicorn space will be an interesting one to watch.”
Other potential IPO candidates flagged by experts include companies in sectors as diverse as financial services, real estate, food and beverages, software, transportation, energy, and materials.
The greater focus for companies choosing to go public in the region seems to be on manufacturing sub-sectors of pharma, food processing, chemicals, electronics, and transportation, according to Muhammad Shahid Nazir, Partner of Corporate Finance and Deal Advisory at Insights UAE.
“[Private sector] companies in rapidly growing sectors such as technology, healthcare, renewable energy, and e-commerce are prime candidates for IPOs,” he said.
“Government-owned entities and state-backed companies in sectors like energy, infrastructure, and financial services may also go public as part of broader economic diversification and privatisation efforts.”
Nazir added that companies in the digital economy space, like fintech and digital services, and family-owned businesses could potentially be considering IPOs.
UAE, Saudi diversification drives fuel flurry of listings
The IPO boom reflects economic overhauls underway in Saudi Arabia and the UAE, experts said, as governments open up sectors and sell state assets as part of diversification plans designed to future-proof Arab economies beyond oil.
“The surge in IPO activity in the UAE and Saudi Arabia signifies a growing confidence in the region’s economic prospects and capital markets,” said Nazir.
“The successful IPOs in the region are likely to encourage more companies to consider IPOs,” he added, citing economic diversification, regulatory support, and investor confidence as key drivers.
Conducive conditions created by initiatives like Saudi Arabia’s Vision 2030 and the UAE’s strategic plans have generated favourable tailwinds for listings, luring companies seeking public funding for expansion.
“Both the UAE and Saudi Arabia are energetically chasing economic diversification strategies to reduce their dependence on oil,” said Nazir.
“This generates a favourable environment for several sectors, including technology, healthcare, and renewable energy, to seek public funding.”
Deepening markets, wooing global investors
The IPO frenzy looks poised to deepen capital markets in the Gulf and potentially lure more foreign money into a region that has already seen a pickup in global investor interest lately.
“Increased IPO activity would contribute to the diversification of the GCC economies, reducing their heavy reliance on oil revenues,” said Nazir.
“This aligns with the economic diversification strategies outlined in plans like Saudi Arabia’s Vision 2030 and We the UAE 2031.”
Amer Halawi, Head of Research at Al Ramz Capital, said any uptick in Gulf representation in global indices would “bring significant capital to the region, and everyone seems to be chasing such capital.”
“Wider, deeper, and bigger regional stock markets” are likely implications of the IPO rush, he added, alongside “better transparency and disclosure, more investment opportunities for local and international investors.”
Risks, readiness concerns
Even as they eye rich public market valuations though, firms must carefully weigh the pros and cons before pulling the trigger on an IPO, experts cautioned.
“Going public should be considered only when the company has either reached the maturity stage or when the company is experiencing high rates of growth. Both scenarios have to be underpinned by robust business fundamentals e.g. market positioning, high margins, strong growth prospects, etc. and a very clear equity story which will lead to a potentially attractive valuation,” said Herrera.
“From a market perspective, the prevailing conditions should be favorable for the IPO. This entails a solid level of overall IPO activity and strong demand expressed by potential investors. High multiples at IPO date and oversubscription/short-term growth of valuation after the IPO are usually all indicators of a robust IPO market.”
Key risks of going public include scrutiny from shareholders and short-term pressures, increased disclosure requirements that could leak trade secrets, and potential management upheaval, Hassan warned.
“If a company has inconsistent or insufficient revenue and profitability the potential valuation may not be fully achieved at the time of IPO,” he said. “Furthermore, public market investors favor companies with predictable and strong financial performance.”
Companies must also ensure they are ready for the rigors of an IPO and the demands of operating as a public company.
“A company that is not adequately prepared for the rigorous demands of the IPO process and operating as a public company shouldn’t rush to market,” Hassan said.
Yet, experts reckon such risks are unlikely to derail the IPO juggernaut as long as market conditions remain favourable.
“We see a visible continuation of the IPO trend in the region this year and beyond, led by the KSA and the UAE,” said Halawi. “The IPO momentum should not abate unless we face a critical global event such as a recession, market consolidation, or significant geopolitical escalation.”
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