IPO performance in the Gulf Cooperation Council (GCC) in the second quarter of 2016 remained low. Oil prices, global economic volatility, regional political unrest, as well as the recent UK vote on the referendum to leave the European Union (EU), continued to bring uncertainty to GCC markets, as reported in the latest IPO Market Watch by PWC. The first regional IPO in Q2 2016, Al Yamamah Steel Industries, owns and operates steel plant factories. They offered 15.24 million shares to the public (amounting to 30% of the company’s share capital) and raised proceeds of US$147 million. The second offering was by L’azurde Company for Jewellery which designs, manufactures and distributes precious metals in the MENA region. L’azurde offered 12.9 million shares to the public (amounting to 30% of the company’s share capital) and raised proceeds of US$127 million. Both companies are listed on the Saudi Stock Exchange, Tadawul.
Steven Drake, Head of PwC’s Capital Markets and Accounting Advisory Services team in PwC Middle East said, “Whilst uncertainties with oil prices remain and regional geopolitics continue to play out, we would expect to see continued volatility in regional equity markets. Valuations tend to fluctuate significantly in times of uncertainty and investors tend to stay out of equities. Any significant IPO activity we see in the short to medium term is therefore likely to be government sponsored”.
Global IPO issuance experienced a slowdown in H1 2016, compared to H1 2015. Nonetheless, activity in the second quarter was higher than the first quarter of 2016. Easing measures from the ECB and Bank of Japan remain in place, while the Fed is now expected to raise interest rates at a slower pace. Together with a recovery of oil prices, a decrease in volatility, and improving economic indicators, investors were notably more upbeat than in the first quarter.
The amount of financing raised through global IPOs fell by 49% in Q2 2016 compared to Q2 2015. However, compared to the first quarter proceeds increased by 136%. Global IPO money raised stood at US$34.5 billion via 241 deals in Q2 2016, compared to US$67.3 billion via 416 deals in Q2 2015 and US$77.0 billion via 325 deals in Q2 2014.
This article originally appeared in http://www.wealth-monitor.com/