The initial public offerings (IPO) market in the Gulf Cooperation Council (GCC) is expected gain further momentum on general improvement in market conditions and investor confidence as well as due to lack of traditional funding sources, according to the Institute of Chartered Accountants of England and Wales (ICAEW).
There is a shift in thinking for regional companies when it comes to choosing the stock exchange for IPOs. In the past, regional companies were going to foreign jurisdictions to issue IPOs but this is not the case now, said the panellists at the ICAEW-organised seminar.
Companies have realised that there is a lot of money in the region and that local exchanges are robust enough to attract foreign investors, they said.
“Rising numbers of IPOs can have a significantly positive effect on business growth and international networks. As oil prices recover and governments continue their diversification efforts, the IPO market in the region will continue to gain momentum,” said Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (MEASA).
Speakers agreed that IPOs issued across the region are still in traditional industry sectors including commodities, energy and real estate. But they are expecting more startups to issue IPOs in the future.
Panellists agreed that 2017 has been a positive year for IPOs and this can be seen in the number of IPOs raised year-to-date, which is almost four times the number of IPOs raised over the same period in 2016.
On why some IPOs fail, panellists said the lack of education in this field to be one of the key reasons. Companies have high valuation expectations and they expect the process to be completed in a short time period, which is not always the case, they added.
ICAEW advised that companies should understand the costs associated with the IPO and ensure that they have the right structure in place before starting the IPO process. The panellists also suggested delivering the financial reporting on time and having robust corporate governance in place.
They applauded the regional governments’ efforts in improving the regulatory frameworks for IPOs and making the whole process faster, transparent and professional.