Saudi Aramco listing to revive Gulf IPO activity after weak quarter: PwC

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Saudi Aramco’s upcoming initial public offering (IPO) on the Saudi Stock Exchange (Tadawul) is expected to revive IPO activity, possibly encouraging a greater number of companies to list across the Gulf Cooperation Council (GCC) after a quiet third quarter, PwC said in a report on Wednesday.

“We anticipate the coming quarter to be significantly more active with the recent announcement of Saudi Aramco’s record breaking flotation on Tadawul, along with many other companies which have expressed their intention to list in 2019,” said Steve Drake, Partner, Capital Markets, PwC Middle East.

Saudi Aramco plans to float two percent on the domestic market as part of its first phase of going public, sources told Al Arabiya. On November 3, Aramco reported a net income of $68 billion for the nine months ended September 30. The company’s revenues and other income related to sales stood at $244 billion for the same period.

Activity across equity markets in the GCC remained quiet during the third quarter of 2019 amid market volatility and geopolitical tensions, with only one company listing on Saudi Arabia’s Tadawul, compared to three in the same quarter last year.

“Even though all IPO activities in the region have been limited to the Kingdom of Saudi Arabia in 2019, we are expecting the UAE market to pick up in the near future as multiple companies have announced their interest to go public and have initiated the groundwork for a successful IPO,” Steve Drake, Partner, Capital Markets, PwC Middle East said in a report.

“Tadawul has recently announced that it will soon allow the listing of foreign companies on its exchange, which will further promote equity activity in the region,” he added.

The only IPO in the region for Q3 2019 belonged to Saudi Arabia’s Ataa Educational Co., which provides educational services. The listing raised $93 million in IPO proceeds as the company offered 12 million shares on the Tadawul. This was the only IPO recorded across the GCC in Q3 2019, compared to $484 million raised in total during the same quarter last year.

Globally, every region recorded lower IPO activity in terms of both proceeds and volume, compared to the third quarter of 2018, said PwC, pointing to geopolitical tensions, economic weakness, and doubts regarding central bank actions.

According to the report, 225 IPOs raised $40.4 billion during Q3 2019, compared to 279 listings with proceeds of $51.5 billion in third quarter 2018 – a decrease of 19 percent in terms of volume and 22 percent in proceeds.

Meanwhile, despite the slowdown in GCC IPO activity, the UAE’s debt market saw a strong quarter – although the region witnessed a slowdown overall.

The emirate of Abu Dhabi issued $10 billion sovereign bond during the quarter, while global port operator DP World issued a sukuk, or Sharia-compliant bond, worth $1.5 billion.

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