Luberef, Aramco set tone for hot 2023 IPO listings in Gulf


Al-Monitor Pro Members


Samuel Wendel

Senior Market Research Analyst, Al-Monitor


Dec. 12, 2022

Bottom Line:

Amid a global IPO slowdown, the Middle East was an outlier in 2022: listings boomed in the UAE and Saudi Arabia, fueled by governments offloading stakes in state-owned companies. The headliner: a $6.1 billion IPO by the Dubai Electricity & Water Authority (DEWA) in April. This IPO bonanza should continue into early 2023. There’s a pipeline of listings on the horizon, while significant firms continue going public into 2022’s final weeks. That said, declining oil demand could undermine the local market and several recently listed companies in the Gulf are already trading below IPO prices. Looking ahead to early 2023, the next phase of the Gulf’s IPO wave will largely rest on the shoulders of a giant: Saudi Aramco. Its refining unit Luberef expects to raise $1.32 billion from an IPO and begin trading on Saudi’s Tadawul exchange by early 2023. Meanwhile, its trading arm Aramco Trading is also exploring a listing slated to arrive in early 2023.  

Background Facts:
  • IPO activity fell sharply across most major markets in 2022 amid global economic hardship. Yet, the Middle East was protected from that turmoil thanks to high energy prices, government initiatives and increased foreign direct investments, which all contributed to local capital market growth, according to PwC. 
  • That came as MENA IPO activity surged in H1 of 2022, with 24 IPOs raising $13.5 billion, representing a 2,952% increase in value compared to H1 of 2021, found EY. Simultaneously, 630 IPOs globally raised $95.4 billion in H1, a 58% decrease in proceeds compared to H1 of 2021.  
  • As of November, Middle Eastern IPOs had raised $18 billion, reports Bloomberg, with the Gulf producing six of the 10 biggest offerings coming across Europe, the Middle East and Africa. Those results are only overshadowed by 2019, when Saudi Aramco raised a record $25.6 billion IPO
  • The UAE recorded its largest IPO ever when the utility DEWA raised $6.1 billion. Another notable issuance came from MENA restaurant operator Americana, which executed the first ever dual-listing on Saudi’s Tadawul and the Abu Dhabi Securities Exchange via a $1.8 billion IPO in December. Americana’s shares rose on both exchanges after making its market debut on Dec. 12.  
  • The promise of high dividend yields has been key to many listings. Privatization of state-owned companies has also fueled activity, which comes as Gulf governments eye economic diversification and more foreign investment.  
  • Regulators have worked to enhance capital markets too. For instance, in 2019 Saudi Arabia’s Capital Market Authority announced new rules allowing foreign issuers to list on the stock market. 
  • Looking ahead, the Gulf’s IPO wave initially centers on Luberef. But more telling will be Aramco Trading’s potential listing, as it could be valued above $30 billion. As of October, Aramco was pushing ahead with a listing by early 2023, but the IPO could be delayed or canceled if market conditions worsen, Bloomberg reported.  
  • Elsewhere, other regional IPO candidates for 2023 include regional broadcast giant MBC Group, supermarket chain Lulu Group International, oil driller Abraj Energy Services, conglomerate Alghanim Industries, money-exchange firm Al Ansari Exchange, and oil and gas drilling firm ADES, among others.  
  • Global banking players have noticed. Goldman Sachs is hiring in the Middle East to tap deals, with a regional executive telling Bloomberg that the bank expects this year's rush of Gulf IPOs will continue into 2023 as demand for regional assets grows and more private companies come to market. Simultaneously, JPMorgan Chase, Citigroup and others are eyeing more regional business. 
  • Part of the Gulf’s 2023 IPO outlook hinges on global recession fears and how oil revenues impact local economies. In November, the International Energy Agency lowered its global oil demand growth estimate for 2023, citing China’s weak economic growth, Europe’s energy crisis and a strong dollar.  
  • Standard Chartered expects the Middle East and Asia to outperform other regions in 2023, despite inflation and rising borrowing costs increasing recession risks in major global economies, Reuters reported in November. 
  • That said, plenty of companies that listed in the Gulf in 2022 have since traded below IPO prices, such as DEWA, Dubai business park operator TECOM, Saudi real estate developer Retal Urban Development, Dubai school operator Taaleem, and Saudi pharmacy chain operator Al-Dawaa Medical Services. 
Alternative Scenarios:

Scenario 1: Gulf IPO activity starts hot in 2023 thanks to more landmark offerings.

Luberef’s trading debut and listings by Aramco Trading and others keep the IPO boom rolling. That bolsters confidence among investors and potential issuers despite global economic woes, positioning the Gulf to continue producing IPO riches during 2023.  

That said, it’s difficult to foresee MENA’s IPO market reaching new highs in 2023. Despite a phenomenal year for listings, a big chunk of 2022 IPO proceeds came from DEWA in H1, while investor appetite for some newly listed firms now appears to be flagging too.  

Scenario 2: The IPO boom evolves and expands across MENA.

More family-owned businesses list, helping sustain elevated IPO activity in the UAE and Saudi Arabia. Simultaneously, regional neighbors such as Egypt and Oman push listings of state-owned firms, seeing an IPO uptick across the region.  

Still, there was little activity on regional exchanges outside the UAE and Saudi Arabia in 2022. For the IPO market to stay hot those countries will likely need to continue producing large offerings.  

Scenario 3: The Gulf IPO window snaps close in 2023.

Global economic turmoil bites local economies as oil demand fades. New Gulf listings disappoint in coming months and the pipeline dries up, with expected listings cancelled.  

However, many are bullish that this IPO wave will continue into 2023, with plenty of companies tapping banks to explore listings. A gradual slowdown in activity seems more likely than a sharp decline.  

Conclusion - Most Likely Scenario:

Gulf IPO activity continues defying global trends in early 2023 as investors stay hungry for key listings in the UAE and Saudi Arabia. Luberef’s performance and the arrival (or delay) of Aramco Trading’s listing should set the tone for the coming year, but regardless 2023 can deliver more winning IPOs from the region. Still, several anticipated offerings likely won’t materialize and the pace of issuances should slow as oil demand erodes and global economic turmoil impacts the region. That will see some companies that listed in 2022 disappoint shareholders in the coming months. The market is already showing signs that it’s not immune to headwinds and dividend yields will have to go higher as interest rates rise. That said, the Middle East still offers plenty of IPO opportunities and local equity markets have clearly made progress. 

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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