Thanks to lighter regulation and legal reforms, initial public offerings (IPOs) in Gulf Arab countries are expected to see a huge leap, says a top IPO lawyer from the region quoted by Gulf News. The reforms are in line with local governments' attempts to diversity their economies, which rely heavily on oil.
The lawyer - Husam Hourani, managing partner at Al Tamimi & Company - said in an interview that the exemption from Dubai IPO rules that regulators granted to real estate company Emaar Properties is a sign of the times and that Emaar won't be the only company to get such an exemption.
After the aggregate size of IPOs in the six Gulf Cooperation Council (GCC) countries reached a historic high of $12 billion (£7 billion) in 2007, it witnessed a fast drop as the economic crisis set in and the market is yet to recover. Last year IPOs in the region stood at a little over $2 billion (£1 billion).
As IPO activity in the GCC takes time to gain momentum again, some Gulf firms have opted to float on foreign exchanges like London, where they enjoy greater liquidity and are less restricted by regulation. However, GCC regulators and banks have made it their priority to support IPOs and thus help bring diversity to their oil-dependent economies, promote more robust market discipline and distribute wealth more broadly among GCC countries, Hourani said.
According to the lawyer, it will take some time before listings match their 2007 peak. He predicts that peak activity in the UAE can't be expected before 2015. Companies need to disclose financial statements for the past two years during floatation and earnings only really starting recovering in 2013, he pointed out.
What matters, though, is that the shift in corporate mood has taken place, Hourani noted.