The Return of the IPOs: Is the Kuwaiti Market Ripe for Such Fruits?

* username: rupertbu

The past few weeks saw a big movement in the Kuwaiti IPO market, as three companies scheduled their IPOs. Manafae Investment started trading in the Kuwaiti Stock Exchange in 16th of March, the Gulf North African Holding Company started trading on the 23rd, and Amwal Investments have planned their IPO for this week or the next.

The timing of such IPOs seems peculiar. First, market valuations are lower than average (both relative to other regional markets and historical), which will yield lower cashflow to the original investors. Second, given the liquidity constraints, investors don’t have the appetite for IPOs. Last, the recent stocks to be IPOed in Kuwait went down a lot.

This wave of three investment companies being IPOed in the timeframe of two weeks raises some questions. What signals are these companies giving to the average investor? Does the management/ owners/ underwriters of these companies believe that the market is ripe enough and has recovered enough for their companies to go public? Are current valuations appropriate since they did not wait for the market valuation to increase as the market appreciates? Are liquidity constraints going to drag the price down as some investors sell their stakes? Are some major shareholders in desperate need for cash and are pressuring the companies to go public?END