The Middle East capital markets are becoming more mature as they undergo an IPO boom driven by state-owned enterprises (SOEs), family businesses, fintech and tech-enabled firms, Dubai International Financial Centre said.
The regional IPO growth is expected to be sustained in three phases. First, the continued privatisation of state-related entities, followed by listings by family-owned companies, and lastly, FinTech and tech-enabled start-ups, according to DIFC’s Regional Outlook for Banking and Capital Markets’ report published in partnership with LSEG Data & Analytics.
DIFC, which is also home to more than 230 investment banks, all of which are stimulating capital markets, is driving this growth as an attractive jurisdiction for incorporation, through its business-friendly approach towards the rule of law, and how the centre has grown as a venue for global investors, said John Wilkinson, head of Emerging Markets Equity Capital Markets and managing director of Goldman Sachs.
Dubai’s capital reforms, aligned with best practices have helped create greater opportunities for investors in different themes of the economy, the DIFC report noted.
The study also factors in the profile of investors based in the region, especially Dubai, which has attracted a rising number of wealthy individuals and families seeking to capitalise on investment opportunities.
Arif Amiri, chief executive officer of DIFC Authority, said that driven by the surge in IPOs, capital markets across the Mena region have experienced remarkable expansion on the back of reforms aimed at enhancing market infrastructure and fostering greater foreign and regional investment inflows.
“With its strategic initiatives and robust regulatory framework, DIFC plays a pivotal role in driving innovation and stimulating growth within the financial sector. Dubai’s IPO boom underscores the city’s status as a thriving hub for capital markets, and DIFC’s role in enabling this acceleration through the firms that drive capital markets and provide advisory services for IPOs will continue to contribute to the dynamic evolution of global finance,” said Amiri.
“Following two years of moderate IPO activity, 2024 shows signs of a rebound supported by the postponement of several 2023 deals in anticipation of more favourable market conditions. According to data published by EY, 51 IPOs took place in 2022, raising $22 billion, including both family businesses and the public sector,” it said.
The report noted that the privatisation of state-related entities leads to greater economic diversification, private sector development, and sovereign liquidity creation. “As of March 2024, Dubai had followed through on six out of the ten government entities it plans to take public, including Parkin, which was 165 times covered and attracted $71 billion in orders – a new record for the emirate. Another recent example includes the November 2023 listing of Dubai Taxi Co., a unit of Dubai’s Roads and Transport Authority, which raised $315 million and was 130 times oversubscribed, while Saudi Arabia’s wider plans to privatise $55 billion in assets by 2025 reinforce the increasing regional trend towards privatisation.”
The listing of family-owned companies is helping to drive business growth, succession planning, and enhanced governance and transparency. Al Ansari Financial Services, one of the UAE’s largest remittance and foreign currency exchange companies, owned by a local family group raised $210 million from its 2023 IPO, while Spinney’s, which was incorporated in DIFC to list its shares on DFM, thereby benefiting from its extensive laws, regulations, and stability, listed in April 2024.
A third wave of IPOs is expected through FinTech and tech-enabled start-up exits, helping to stimulate new industries with high-growth potential, while creating strong demand from investors and viable exit options for VC investors.
Through increased IPO activity, banks, investment banks, brokerage firms, and law firms within DIFC’s ecosystem also benefitted significantly from the privatisation of state enterprises, with fees for Mena deals alone exceeding $1.2 billion and proceeds from equity and equity-related deals exceeding $13 billion in 2023.
The Mena region is home to a vast range of potential investors. Notably, these include family businesses and wealthy individuals represented by the influx of wealth from asset management firms.
According to recent data, the UAE attracted a record-breaking number of High-Net-Worth Individuals in 2022, which continued into 2023 and beyond. Currently, there are an estimated 109,900 resident HNWIs, including 298 centi-millionaires and 20 billionaires, prompting DIFC’s estimated 370 asset managers to strengthen their presence in the emirate.