Saudi Arabia is the sole country in the region to register an IPO activity in the third quarter of this year with two listings on the Tadawul, said Ernst & Young in its Q3'11 MENA IPO Update. United Wire Factories of Saudi Arabia ($88.3 million) was listed in August 2011 and Hail Cement Company ($130.5 million) was listed in September 2011, the report said. The regional capital markets raised $218.9 million in the third quarter of 2011, up by 23.6 percent from the $177.04 million raised during the same period in 2010, but down 39 percent from the $335.05 million raised in the previous quarter. Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young, said: "The listings in Saudi Arabia are an exception to the lack of IPO activity in the key MENA capital markets. Investors in the region are still uncertain of what fair value is due to the follow-on effect of the EU debt crisis and the slowdown in the US. This is increasingly becoming true for almost all asset classes, including equity and IPO pricing." "Companies have had to postpone going to market since 2009 and will continue to do so this year. Investors are again looking for safety as uncertainty is set to continue in the fourth quarter. Predictions of listings, even in the low single digits, may not necessarily hold for the next quarter, however the pipeline of companies waiting for their IPOs is building up," he added. Global IPO activity has fallen sharply in Q3'11. So far this quarter, a total of 284 deals raised $28.5 billion, this compares with 383 IPOs worth $65.6 billion for Q2'11 (a 26 percent decrease in number and 57 percent drop in capital raised). In Q3'10, there was 302 IPOs which raised $52.5 billion (a 6 percent drop in number and a 46 percent decrease in capital raised compared to Q3 2011). Only 3 deals raised over $1 billion globally in the third quarter. Average deal size decreased in many markets in Q3'11 compared to Q2'11. The global average deal size was $100 million in Q3'11, compared to Q2'11 ($171 million). Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young, said: "The third quarter results show that the euro zone and US debt crisis have had a deep impact on the IPO market and on both issuers and investors' confidence. There are, however, many very good businesses still waiting to go public. Companies have not stopped seeing IPOs as a way of raising capital. They are waiting for markets conditions to improve, while continuing to prepare for their IPO." The report noted that Asian issuers continued to dominate IPO activity in Q3 with 138 deals, which raised $13.5 billion altogether (47 percent of global funds raised). However, "this is the lowest level of capital raised by Asian issuers since Q2'09 ($3.0 billion in 44 deals)," it said. European issuers completed 69 deals, which raised $8.8 billion (31 percent of global funds raised), significantly less than Q2'11 ($21.7 billion in 96 deals). Q3'11 activity remained higher than Q1'11 with $2.4 billion raised 52 deals. North American issuers raised $4.5 billion in 41 deals (16 percent of global funds raised) compared with $11.6 billion raised with 55 deals in Q2'11 (18 percent). "Asia will continue to lead global IPO activity as domestic and foreign IPO pipeline builds. As soon as the market stabilizes, we will start seeing a big wave of IPOs, as there is currently a record amount of about 3,000 companies in the pipeline globally. The dominant trend in Europe's IPO markets will continue to be state-owned enterprises. We have seen recently examples of European countries taking SOEs public. Governments need to act quickly to help lower market volatility and restore investor confidence for the IPO market to recover," Pinelli added.
