The Curse of the IPO

Facebook was probably the most-anticipated tech initial public offering since Google went public in 2004.

But it all went sour when shares quickly went downhill and the stock fell well below the initial IPO price.

It’s not just big brand US IPOs that have fallen flat.

The scene hasn’t been much rosier in the Middle East, where chronically illiquid markets have staved off many public offerings.   Axiom Telecom, the Dubai-based mobile phone retailer,  was poised to be the first UAE company to sell shares to the public in more than 18 months in December 2010.   Weeks later, the company pulled out citing lukewarm investor appetite.

Last year the market got a further blow as uprisings rippled across the region creating market volatility and political turmoil.

It meant total funds raised from the Middle East and Africa stood at $929.9m in 2011, a 68.5% decline on 2010, research from Ernst & Young shows.  Unsurprisingly, Saudi Arabia led the way generating almost half of that amount, with $417.8 million raised.    

Ernst & Young research

Now as the political sphere calms some Arab countries are trying the market again.

Firms in the region raised a total of $1.29 billion through five IPOs in the second quarter of 2012, almost three-and-a-half times more than the $374.77 million raised in the second quarter of 2011, according to the Ernst & Young research.

They were by IPO size:

1) Saudi Arabia’s Al Tayyar Travel Group with its $364.65 million listing on the Tadawul

2) Saudi Airlines Catering’s $354.09 million listing on the Tadawul

3) Najran Cement Company’s $226.58 million IPO, also listed on the Saudi stock exchange

4) UAE-based NMC Healthcare which listed on the London Stock Exchange with a $187 million IPO

5) Oman’s Bank Nizwa that raised $158.49 million and is listed on the Muscat Stock Market.  This IPO was a result of the regulatory changes in Oman’s banking sector which has recently approved Islamic banking.

So with the IPO climate looking brighter, a word of warning from JPMorgan’s Klaus H. Hessberger, co-head of capital markets in EMEA

“Corporate governance and political  stability remain key focus points [in the Middle East].  A successful IPO needs to be a sizable  company with a strong story that can  benchmark itself against European peers. 

Most will also take a listing in the US, London or an Asian market to add some quality.” 

With that in mind, it seems anti-climactic that the next planned IPO in the region is  Al Izz Islamic Bank in Oman which will float 40% of its 100 million rial capital.

The only exciting feature is that Aabar Investments, the notoriously media-shy state-owned Abu Dhabi fund with stakes in Glencore, Daimler and UniCredit, is Al Izz’s cornerstone investor.

What that says about Aabar’s venture into Islamic finance is a different story, but surely with a giant like Aabar behind it, Al Izz can’t go wrong?

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