The number of initial public offerings (IPOs) in the GCC will increase in the next two years, Karim el-Solh, chief executive officer of UAE-based Gulf Capital, told the First Middle East IPO Summit in Dubai on 26 February. Some 116 IPOs are planned in 2006-08, up from 25 in 2005 and 12 in 2004. Managers have been assigned to 60 of the offerings, which will cover sectors that have seen few IPOs such as travel, tourism, mining, services, media and industry. 'The liquidity is there to sustain upcoming offerings,' El-Solh said. 'Continued economic growth and the oil price will support them.'
IPOs in 2006 are expected to have an average size of $292 million, an increase from $248 million in 2005 when total capital raised reached $6,200 million and IPOs were on average 71 times oversubscribed. 'This shows the appetite for IPOs but also how badly they were mispriced,' said El-Solh.
World Trade Organisation (WTO) membership is encouraging companies in the region to raise capital through an IPO, said Maha al-Ghunaim, managing director of Kuwait's Global Investment House. 'There's a need for economies of scale. Companies need to be bigger to have a presence in the market,' she said. 'We're starting to see bigger and bigger deals. The culture of raising risk capital through an IPO is gathering steam.'
But Mohammed Abudawood, vice-chairman of Saudi Arabia's Abudawood Group, said there was a need for further privatisation and some sort of mechanism to prevent too much speculation, such as a ceiling on share multiples. '[Accelerated] privatisation will let other people share the wealth and build a real middle class,' he said. 'Two million people have invested in the Saudi stock exchange. And we can't afford the market to crash.'