An equity capital markets boom in the Gulf shows no signs of slowing down, with e-commerce and information technology companies among those expected to go public in the second half, according to the top ECM bank in the region this year.
“We’ve been very busy in terms of pitching to establish a second half pipeline, which is looking extremely active for us,” said Ali Khalpey, the head of equity capital markets at EFG Hermes. “The demand picture remains intact mainly because the macro remains very constructive.”He expects his firm to work on five listings in Saudi Arabia by the end of the year, while at least two IPOs are brewing in Oman. IPOs in the United Arab Emirates will also continue — these will mostly be private sector-led, with the exception of one government-backed deal from Dubai and another from Abu Dhabi, he said.
Across the region, e-commerce, IT services, health care and consumer finance companies are likely to go public, Khalpey said, without naming any specific firms. Private-sector deals are likely to be in the $300 million to $500 million range, while government listings will be larger, he said. The banker also expects more secondary offerings to come after Saudi Aramco and Adnoc Drilling Co.’s recent deals.
Khalpey’s comments come after a hugely busy few years for ECM activity. Local investor appetite has soared as oil revenue buoys the region, while the Gulf’s push to reduce reliance on the energy sector has meant governments are encouraging firms to go public to bolster their capital markets.
EFG Hermes, the investment banking arm of EFG Holding, has arranged the most equity offerings in the Middle East and North Africa so far this year, according to league table data compiled by Bloomberg. The Egyptian firm has 10% of the market share in arranging IPOs and secondary share sales, ranking above Wall Street giants like JPMorgan Chase & Co. and overtaking HSBC Holding Plc, which topped the list in 2022 and 2023.
Khalpey’s firm advised on the IPO of health-care group Dr. Soliman Abdel Kader Fakeeh Hospital Co. — the biggest in Saudi Arabia so far in 2024 — as well as the listing of Riyadh-based water treatment firm Miahona. EFG Hermes also had a role in Aramco’s $11.2 billion secondary offering, and was joint global coordinator and joint bookrunner for Adnoc Drilling’s $935 million secondary share sale.
Gulf-region IPOs have mostly been successful, with the average UAE and Saudi stock which listed between 2021 and 2024 up 44% since going public. Still, some have underperformed. Among those where EFG Hermes was involved, Alef Education Holding Plc is trading 13% lower than its debut price, while supermarket chain Spinneys 1961 Holding Plc is little changed since its May debut.
“We’ve definitely pushed the valuation boundaries when it came to both these IPOs,” Khalpey said. “It takes time for people to appreciate the business models that these companies have.”
IPOs in the region have mostly been dominated by local investors, with foreign investors often struggling to get large allocations. One notable exception was Aramco’s jumbo share sale, in which foreign investors were allocated about 60% of the offering, Bloomberg News reported.
“We still continue to see the large emerging market investors struggle to participate in these deals,” Khalpey said. “The only way we can resolve this scenario is larger deals.”
