Al-Monitor Pro

ADNOC boosts Middle East IPO activity as Saudi Aramco debates next moves


Al-Monitor Pro Members


Samuel Wendel

Senior Market Research Analyst, Al-Monitor


May 24, 2023

Bottom Line:

Amid an enduring global IPO slump, the Middle East continues to produce new listings in 2023. That’s headlined by Abu Dhabi’s national oil company ADNOC delivering Q1’s largest IPO globally, with its gas business raising $2.5 billion in March. Looking ahead, the region’s pipeline of potential issuances remains promising despite some signs this listing bonanza could be losing steam in Saudi Arabia. The kingdom’s main stock market didn’t register any key Q1 listings and news surfaced in May that Saudi Aramco was postponing the mega IPO of its trading arm until market conditions improve. Yet, as Aramco waffles on next moves, another state oil giant is powering regional IPO activity and there’s still ample potential for the Middle East to serve up more listings in 2023.

Background Facts:
  • Many were bullish on the Gulf’s IPO boom continuing into 2023. So far, the Middle East and North Africa (MENA) has retained strong momentum despite weaker global sentiment in 2023, according to Ernst & Young, which recorded 10 IPOs in the region in Q1 with combined proceeds of $3.4 billion. 
  • That represented a 33% drop in listings and a 14% decrease in value compared to Q1 2022, but came as 299 IPOs globally raised only $21.5 billion, a 61% decrease in volume year-on-year.
  • The UAE has already delivered another landmark listing: ADNOC Gas, a unit of Abu Dhabi’s state oil company, raised $2.5 billion via its March IPO on the Abu Dhabi Securities Exchange (ADX). The offering was 58 times oversubscribed. Q1 also saw the ADX welcome the $496 million IPO of data analytics firm Presight AI. The offering was 136 times oversubscribed. 
  • Saudi Arabia produced the most Q1 listings with six IPOs on its parallel market Nomu, which generated combined proceeds of roughly $700 million. However, the kingdom’s main market, Tadawul, didn’t record any notable IPOs. 
  • Yet, activity across the wider region remained stagnant, with the notable exception of Oman’s Abraj Energy Services, which raised $244 million on the Muscat Stock Exchange in March. The offering, oversubscribed nearly 9 times, was the Sultanate’s largest in a decade and part of a government plan to list 35 state-owned companies in coming years. 
  • MENA’s IPO momentum was dealt a blow in May, when Bloomberg reported that two notable regional listings were being delayed. The first was the postponement of Aramco Trading’s mega IPO, which could value the firm at over $30 billion and would rank among the world’s largest listings this year. 
  • Saudi Aramco has reportedly significantly slowed down preparations on the deal in recent months, with the energy giant believing it could be difficult to list such a large business on Tadawul currently
  • Aramco hasn’t set a new timeline and may postpone it until next year unless the market improves. Notably, this news comes only months after Aramco successfully listed its base oil unit Luberef, which raised $1.3 billion in December 2022. 
  • The second delayed listing is the $1 billion IPO of oil and gas driller ADES International Holding, which is backed by Saudi’s Public Investment Fund. Originally slated for March, the offering is being pushed until H2 of 2023.
  • These delays have been seen as indications that the Gulf’s listing boom is cooling off. Yet, barely a week later Bloomberg reported that Saudi Arabia’s plans for another multibillion-dollar offering of Aramco stock are gaining fresh momentum
  • The kingdom could make a decision in coming weeks about whether to proceed with a follow-on Aramco offering on Tadawul. Although no precise timeline has been set, the issuance reportedly could happen in 2023
  • 2023 has also seen speculation around a potential Aramco listing on Hong Kong’s stock exchange amid growing engagement between China and Saudi Arabia.
  • Meanwhile, the region’s IPO pipeline remains active. The UAE registered its first Q2 IPO when Al Ansari Exchange’s shares debuted in April on the Dubai Financial Market after raising $210 million
  • Simultaneously, ADNOC is preparing to list its logistics and shipping unit in June and recently increased the size of the IPO to 19%, up from 15% previously. That could see it raise up to $769 million.
  • Saudi Arabia could still deliver other significant listings too. Reuters reported in early May that Singapore-based agri-food giant Olam Group aims to launch a dual-IPO between Saudi Arabia and Singapore in June, which could raise $1 billion
  • Tadawul’s IPO pipeline includes dozens of companies. That includes Jamjoom Pharmaceuticals Factory Company, which could raise up to $336 million after setting its IPO price range in May.
  • Oman’s sovereign wealth fund has also announced plans to list the gas pipeline company OQ Gas in 2023. Bloomberg reported last year that OG Gas could raise up to $800 million via a dual listing in Saudi Arabia and Oman. Elsewhere, Qatari IT firm MEEZA is nearing a Q2 IPO.
  • Outside the Gulf, Egypt’s government has finally kicked off its privatization program after outlining plans to offer stakes in dozens of state-backed and military owned firms in 2023 through direct sales to strategic investors and listings on the Egyptian Exchange (EGX). 
  • 2023 has delivered mixed performance among regional stock markets. Egypt's blue-chip EGX30 index was up roughly 15% in 2023 as of May 18, while Saudi Arabia’s benchmark index TASI had risen roughly 7.5% and Dubai’s main share index DFMGI was up 6.7%. However, Abu Dhabi’s FTFADGI was down 7.3% and Oman’s MSX30 had dropped about 3.5%.
  • At Q1’s end, six out of the 10 MENA IPOs had positive returns compared to IPO prices, led by Presight AI’s 146.3% gain, according to EY. ADNOC Gas shares were also up about 41% by early May.
  • Ultimately, 2023 regional IPO activity was expected to recede from last year’s record levels amid economic headwinds and recessionary fears, but new risks could undercut remaining momentum. 
  • Oil production cuts, inflation and ongoing geopolitical instability are all influencing regional IPO activity, while 2023 is seeing unexpected global banking turbulence. There’s also a potential US debt default to consider; although unlikely, it’s become an uncomfortably realistic scenario and would cause global economic and financial chaos.
Alternative Scenarios:

Scenario 1: Privatization pushes power new IPOs in coming quarters

The EGX enjoys resurgent IPO activity as the government finally lists state-owned firms, while Oman’s wealth fund continues offering up stakes in 2023. This helps MENA again serve as a global IPO bright spot, despite economic turbulence undercutting offerings in Saudi Arabia and the UAE.

Yet, Egypt’s government is expected to prioritize selling stakes to strategic investors in coming months rather than pursue IPOs. Oman could easily deliver additional 2023 listings, but the UAE and Saudi Arabia will remain the key markets.

Scenario 2: Aramco delivers another blockbuster listing in 2023

Saudi Arabia pushes ahead with another stock offering on Tadawul linked to its state-owned energy giant. The multi-billion dollar share sale ranks among the world’s largest in 2023 and MENA again generates record levels of market activity.

That said, the postponement of Aramco Trading’s IPO wasn’t unexpected and Saudi Aramco’s original listing famously faced multiple delays. An international offering designed to tap foreign demand can’t be discounted either— potentially even a dual-listing between Riyadh and Hong Kong.

Conclusion - Most Likely Scenario:

ADNOC is shaping up to be the big IPO winner in 2023. Although not implausible following Luberef’s successful debut, it’s fairly unlikely we’ll see listings from Aramco and its trading unit in 2023, but the prospect of the energy giant pursuing new public offerings will continue fueling market intrigue. Meanwhile, the Gulf’s IPO window should remain open in coming months, spurred by government initiatives promoting new listings despite mounting headwinds. Still, anticipated IPOs could easily stall amid a less favorable funding environment and the overall pace and magnitude of listings should continue trending well below 2022. Regardless, Q1 indicated there’s unquenched investor appetite for new regional equities and quality assets remain in the pipeline.

Contributor Background:

Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.

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