According to a head of a private equity firm, member-companies of the Gulf Cooperation Council should not be enticed in getting listed in foreign exchanges despite the poor performances of trading bourses at home in the past few years. A report published on Gulf Business said GCC companies are now looking into launching their initial public offerings in London, most notably healthcare businesses NMC Healthcare and Al Noor Hospitals, and Damac, a luxury real estate company.
TVM Capital MENA (Middle East and North Africa) chairman and chief executive officer Dr Helmut Schuehsler told Gulf Business, "With all the experience we have of listing companies outside of the country of their domicile, our general perception is it doesn't work in the long run. It works in the short run very often because there is a certain hype, but if you look 10 to 20 years later it's not worked and the reason is people buy domestic."
Schuehsler, who has led 40 companies into getting listed during his tenure, said GCC companies are looking into foreign exchanges like London as the financial markets abroad are more stable. He also credited the connection of the Arab community to London as another crucial factor.
"The attraction is liquidity and the attraction is markets that have long term buyers. The Middle East has proven to be a very emotion driven market, where people rush in the prices explode and then they come back out again. This is something that will drive the success or failure of Arab or Gulf company IPOs in London, will the Arab community be able to maintain that strong interest in the UK and London and strong interaction with investors and institutions in the UK. If that is maintained I believe we will see a lot more businesses from the Gulf list in London," Schuehsler stated.
Based on MENA Q3 IPO update by Ernst & Young, the value of IPOs in the region experienced a 45.3% dip in the third quarter of this year at $138 million as opposed to $252.3 million seen in the same period last year. On the other hand, total capital raised for the first six months of this year increased 52% to $2.1 billion from $1.4 billion in the same period in 2011. EY projected that IPOs could stage a comeback in 2014 for MENA due to improvements in capital market conditions, majority of it will be concentrated in Saudi Arabia and the UAE.
Join the Conversation