Market volatility and a fall in investor sentiment led to a decline in initial public offering (IPO) activity in the Gulf Cooperation Council (GCC) for the second quarter of 2017, according to a recent report by PWC.
After a huge uptick in activity at the beginning of the year, the number and value of IPOs launched in the GCC fell from 10 to 3 and $400 million to $171 million respectively. Compared to last year, the number of IPOs launched increase (from 2 to 3), but the overall value dropped by 38% ($274 million to $171 million).
Compared to the rest of the world, the GCC lagged against other regions despite global IPO activity increasing by almost 50% in terms of value and number of IPOs since Q2 of 2016, though the effects of Brexit and an unpredictable Trump Administration may cause a bit of a slow down in the issuance of IPOs.
Saudi Arabia hosted all 3 of the IPOs during the quarter:
Jadwa Investment, an investment management company in Saudi Arabia, launched the first Sharia-compliant Real Estate Investment Trust (REIT) which will invest in income-generating real estate properties across Mecca and Medina.
The REIT offered 36 million units at a nominal value of SAR10 per unit, giving a total value of SAR360 million. Popularity for the IPO was overwhelming as almost 6,000 individual and institutional investors subscribed for SAR4.53 billion during the offer period, resulting in a coverage of 1,257%.
According to Tariq Al-Sudairy, the managing director and CEO of Jadwa Investment, the REIT offers a net yield of 5.2%.
Clothing manufacturer Thob Al-Aseel’s IPO was the largest in the second quarter of the year after floating 3 million shares (20% of total share capital) at SAR85 per share and, similar to Jadwa’s IPO, it was oversubscribed by 150.33%.
Thob Al-Aseel managed to obtain the Capital Market Authority’s approval on increasing the number of offered shared from 1 million to 3 million, following a move to hike capital from SAR50 million to SAR150 million.
The IPO was launched on the Saudi Nomu Parallel Market. The indicated gross dividend yield currently stands at 5.52%.
Construction materials specialist Al Kathiri Holding Company was the final IPO to be launched in the GCC area between the beginning of April and end of June, also making an appearance on the Saudi Nomu Parallel Market.
The company offered 819,000 shares (26.1% of its share capital) at a price of SAR31 per share and was only marketed for qualified investors. Like the other two IPOs, Al Kathiri’s offering was also oversubscribed, this time by 251%. 97 investors pumped in a total of SAR60 million, meaning the company’s IPO was the smallest in the quarter.
The share price tumbled by 20% on its debut on the Nomu Parallel Market.