Cross-border IPOs slid back to just below 2013 levels in 2015 after significantly outperforming domestic initial public offerings in both value and volume growth terms in the past two years.
Only the Europe, Middle East & Africa (EMEA) region showed growth in domestic deals. Global trends were reflected in the UAE, Saudi Arabia and Egypt.
According to a report from Baker & McKenzie, cross-border IPOs took the biggest hit, raising $37.8 billion globally as of December 10, a 53 per cent drop-off from last year, as sluggish markets, geopolitical uncertainty and other factors led to a year dominated by mergers and acquisitions rather than debt offerings.
That comes after consecutive years that saw meteoric rises in cross-border flotations - in 2014, such deals rose 98 per cent, and in 2013, they rose 78 per cent. Domestic IPOs, meanwhile, fell 25 per cent from a year ago, though the difference between this year and last year wasn't quite as stark, as 2014 saw a rise of just two per cent for domestic IPOs.
"The uncertain worldwide economic environment coupled with low commodity prices have had an impact on the cross-border activity in terms of capital markets as companies have retrenched to their home turfs and have been hesitant to expand beyond that due to these uncertainties and have recourse to other means of financing than capital markets," said Mazen Boustany, head of banking and finance at Baker & McKenzie Habib Al Mulla.
"We have witnessed first-hand with Saudi retrenching from a raft of world-wide investments due to low oil prices and liquidity crunch," they said.
Cross-border deal values rose 98 per cent in 2014 and 73 per cent in 2013. Cross-border volumes declined 32 per cent to 128 deals after a 26 per cent gain in 2014 and 58 per cent increase in 2013.
After a year of inactivity, there was only one cross-border listing by a UAE issuer - the IPO of Orascom Construction, which debuted on the Egypt Stock Exchange and raised $185.01 million. Cross-border IPO activity by Saudi Arabian issuers remained inactive for this year.
2015 saw the first cross-border IPOs by Egyptian issuers in the last five years. The two listings raised $558.14 million and were among the most notable cross-border IPOs across the EMEA region. The $334 million IPO of Integrated Diagnostics Holding and the $264 million IPO of Edita Food Industries SAE were dual listed on the Egypt and London Stock Exchanges.
Notably, just three exchanges accounted for 93 per cent of all cross-border IPOs in 2015 - the Hong Kong Stock Exchange, Nasdaq and the London Stock Exchange - with companies seeking to raise capital in deeper, better capitalised markets.
Nine of the 10 largest global cross-border deals were Chinese companies listing on the Hong Kong Stock Exchange. Globally, 2015 saw increased cross-border IPOs in the telecommunications, healthcare, financials and industrials sectors.
Domestic issuance fell 25 per cent globally in 2015, but off the back of a rise of just two per cent in 2014. Domestic volumes also fell by 17 per cent. However, domestic listings grew seven per cent by value in EMEA, the only region that showed growth in domestic deals.
There were no domestic listings in the UAE this year, in contrast to last year's five listings that raised $2.91 billion. Similarly, domestic IPOs in Saudi Arabia declined this year, with capital raised dropping 84 per cent (from $6.4 billion in 2014 to $1 billion in 2015), while volume fell from five listings to three this year.
Egypt, on the other hand, tripled its domestic IPO activity with $360.3 million raised from three listings in 2015, in contrast with one IPO valued at $108.7 million in 2014.
"It has been a challenging year, with high volatility, low commodity prices and macro uncertainty likely to continue to have an impact on the markets in 2016 before cross-border offerings pick up again," said Karim Nassar, head of capital markets at Baker & McKenzie's associated firm in Riyadh.
"'Next quarter' was the theme of 2015 as IPOs kept being pushed back throughout the year, and banks across the Middle East are bracing for more challenges in 2016," added Boustany.
"With diversification accelerating across the GCC in an effort to reduce the impact of oil price volatility, and with new commercial and financial regulations being implemented in the region, there is hope for future cross-border capital flows," he said.
