It’s time for other Gulf stock markets to follow the UAE and Saudi Arabia’s IPO model

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In Saudi Arabia and the United Arab Emirates, we are seeing a thirst for IPOs among investors due to the availability of sufficient funds looking for suitable investment channels. Additionally, there is external interest in investing in Gulf companies due to the existence of investment laws, commercial courts and political stability.

During its IPO, DEWA offered 9 billion shares, worth 22.3 billion dirhams, representing 18% of the issued share capital, and the Government of Dubai retained 82%. The IPO attracted a number of institutional funds and 65,000 retail investors to raise 315 billion dirhams. The backlog for the IPO was oversubscribed 37 times, making it the second largest IPO in the region’s history, a new achievement reflecting confidence in the UAE economy. It’s not an isolated event – ADNOC Drilling’s IPO proved much the same when it raised $1.1 billion late last year.

In Saudi Arabia, 13 companies have recently been offered for public subscription and another IPO is expected in May. These IPOs were in various sectors, such as energy and petrochemicals. And who can forget the biggest IPO in Aramco’s history in 2019, in which it raised $25.6 billion compared to $25 billion raised by China’s Alibaba in 2014.

As with the rest of the GCC countries, IPOs were limited to one company each in Kuwait and Oman. Kuwait-based Ali Al Ghanim is expected to offer 45% of its shares in May, while Omani-based Barka Desalination Co. (BDC) offered 15.1 million shares for public subscription in January and raised 4.8 times the amount required, which highlights the funding capabilities to launch more stock market forays.

However, the Bahraini market did not see any new IPOs during this period, but in Qatar, capital market activity was limited to raising the capital of Qatar First Bank by offering 420 million additional shares earlier this month to raise QR1.12 billion.

This highlights the fact that IPOs are leading the way in the UAE and Saudi Arabia, but are almost absent in the other GCC countries. This is not due to the lack of liquidity or the lack of investment opportunities, but rather the lack of initiatives from IPO entities, which is a major flaw that needs to be addressed.

GCC countries have a conducive environment for the development of companies with public participation, in addition to creating investment opportunities that can attract local and foreign private capital and savings from individuals to inject them into the veins of Gulf economies. This is a priority to serve the strategic objective of diversifying sources of national income.

In this regard, the current conditions can be exploited to attract such investments, firstly because of the significant increase in oil prices and the great liquidity it provides. And secondly, because of the geopolitical situation in the world, which led to the influx of huge funds into the Gulf. These require new initiatives to take advantage of these rare opportunities.

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