A majority (84 per cent) of UAE investors are ready to invest in future IPOs, a study showed.
The global economy experienced a slower growth rate in 2023, marked by high interest rates, inflation, and geopolitical tensions. However, the UAE’s resilience resulted in positive IPO market conditions, which saw the country contribute a stellar 58 per cent of 2023 IPO proceeds in the GCC.
Findings from the UAE Investor Pulse Survey 2024, conducted by Edelman Smithfield, a specialised global financial communication advisor, reveal a significant investor appetite for UAE IPO offerings in 2024. The survey indicates a positive sentiment among investors regarding the valuation of firms that have undergone IPOs in the past three years. Notably, 73 per cent of investors view these firms as fairly valued, underscoring a well-balanced market perception.
Additionally, the survey reveals a significant vote of confidence among investors in the bookbuilding process, considered a critical aspect of IPOs. An impressive 71 per cent of investors have expressed trust in the bookbuilding process, indicating a high level of satisfaction and faith in its transparency and efficacy.
Another noteworthy finding is that approximately two-thirds (67 per cent) of respondents agree that having two distinct exchanges benefits the UAE capital markets and offers increased investment opportunities.
In light of these findings, Simon Hailes, managing director and head of Middle East at Edelman Smithfield, remarked: “Our Investor Pulse Survey provides valuable insights into investor sentiments and expectations regarding the region’s capital markets. It’s encouraging to witness the growing investor confidence in the UAE markets and their strong appetite for UAE IPOs. However, to maintain this IPO momentum, it’s crucial for potential and existing issuers to prioritise transparent and consistent communication efforts. Our survey findings validate this, revealing that two-thirds of investors expect transparency and effective IPO communication from issuers to make informed decisions.”
Hailes added: “With the region increasingly recognised for its economic vitality and investment potential, our insights strongly support the growing investor interest in UAE capital markets.”
Other key findings from the Edelman Smithfield’s UAE Investor Pulse Survey 2024 include:
Transparency and Communication: 65 per cent of investors prioritise transparent IPO communications for informed decisions. 63 per cent highlight the positive impact of well-produced roadshow videos on IPO investment willingness.
Use of proceeds: 7 per cent consider the use of proceeds when evaluating potential IPO investments.
Evaluating investment opportunities: 82 per cent emphasise the importance of quality earnings in evaluating investment opportunities. Profitability (41 per cent), strong balance sheet (31 per cent), and brand awareness (27 per cent) are key metrics for evaluating companies going public.
Investment plans and guidance: 71 per cent of investors prefer new issuers with organic growth investment plans. There’s a push for increased clarity and availability of medium-term guidance on a quarterly basis.
Board preferences: Investors prefer boards with diverse experience, including overseeing publicly listed entities (82 per cent), cybersecurity (84 per cent), and ESG (84 per cent).
Sector Interest: Real estate (51 per cent), tech (41 per cent), and healthcare (33 per cent) are the top sectors of interest from an IPO perspective.