Gulf IPOs: When is it a bad idea to go public?

With billions on the line, the Gulf IPO boom is here to stay. Because the region’s economic transition is in jeopardy, businesses need to exercise caution in order to realize their full potential, according to analysts.

In recent months, the Gulf area has witnessed a frenzy of initial public offers (IPOs), with the UAE setting some record-breaking debuts and Saudi Arabia witnessing a deluge of listings.

A recent EY research states that ten initial public offerings (IPOs) in the Gulf area raised a total of $1.2 billion in the first quarter of 2024 alone. Nine of the listings raised $724 million for Saudi Arabia, while the UAE saw the largest offering of the quarter with Parkin Company’s $429 million IPO on the Dubai Financial Market.

When to not pursue an IPO

“It’s generally a bad idea to go public when the issuer has no real, genuine, underlying reason or need to do so, apart from making a quick buck,” said Amer Halawi, Head of Research at Al Ramz Capital.

One key red flag, according to Muhammad Shahid Nazir, Partner of Corporate Finance and Deal Advisory at Insights UAE, is unstable financials or uncertain performance. “Companies with unstable or uncertain financial performance may struggle to attract investors and maintain a stable stock price,” he told Arabian Business.

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