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Qatar joins Gulf IPO spree as post-World Cup economic plans advance
Al-Monitor Pro Members
Samuel Wendel
Senior Market Research Analyst, Al-Monitor
July 7, 2023
Qatar’s years long IPO drought is over: shares of IT services firm Meeza are set to debut on the Qatar Stock Exchange (QSE) in July 2023 after the company raised roughly $193 million. This comes as the gas-rich Gulf state is trying to capitalize on its $300 billion World Cup investment, with Doha charting an ambitious economic diversification agenda alongside its Gulf neighbors. That’s where Meeza’s IPO comes in — the rare flotation is part of a bid to reinvigorate Qatar’s sleepy equity market and attract more foreign investors. Although World Cups generally boost the stock market fortunes of host countries, the QSE lags counterparts in the UAE and Saudi Arabia, which have enjoyed an IPO boom recently. However, Doha is making moves to become more competitive and reach developed markets status. That could make Qatari IPOs much more common going forward.
- Amid a Gulf IPO boom in 2022 that raised roughly $24 billion in proceeds, Qatar remained conspicuously absent, producing zero IPOs as Doha prepped for its World Cup.
- Despite significant financial firepower, Qatar’s stock market has been overshadowed by more active Gulf rivals. That’s despite earning an upgrade to emerging markets status from index provider MSCI in 2014 — the same year the UAE was classified as emerging and five years ahead of Saudi Arabia.
- Historically, equity markets of FIFA World Cup host countries have on average outperformed peers, according to research by Qatar National Bank (a sponsor of the tournament). During a turbulent year for global equities in 2022, Qatar’s benchmark QE Index got off to a hot start before surrendering gains to end the year. That trend continued into 2023, with Qatar’s benchmark index falling roughly 5% during the first half of the year.
- Post-World Cup, the world’s top LNG exporter is focusing on economic diversification—a strategy that includes developing its financial market and attracting a wider investor base, with a goal of transforming Doha into a leading regional investment hub. That includes an ambition to reach developed markets status.
- The QSE recorded its largest foreign investment flows in its history in 2022, according to the Qatar Investment Authority, or QIA, the country’s sovereign wealth fund. Also, Bloomberg reported in May 2023 that the QIA and local pensions funds were examining a proposal to consolidate local stock holdings under a separate entity, a bid to entice foreign investors and deepen markets that could attract $3.5 billion of passive flows.
- Qatar’s stock exchange is working to improve liquidity and encourage more listings. That has produced the flotation of a 50% stake in Meeza, Qatar’s first IPO in over three years and the largest since 2019, when dairy company Baladna raised $392 million.
- The new offering represents several firsts: alongside becoming the first IT firm listed on QSE’s main market, Meeza was the first to use a new book-building process, which allows companies to offer a price range to gauge investor appetite and more transparently determine pricing.
- Qatar introduced book-building regulations in 2021, with the pricing of local offerings previously based on feedback from two independent valuation reports, according to Reuters.
- As a trial run, Meeza’s IPO has been a success. Upon launching its IPO process in January 2023, the offering’s price range was $0.72 to $0.77 per share, which could have seen Meeza potentially raise $250 million. Through the book building process, the price was eventually set at $0.60, producing a $193 million IPO.
- After the subscription period closed on June 19, 2023, Meeza announced an oversubscribed orderbook covered by qualified and retail investors. The flotation saw the telecom Ooredoo and the Qatar Foundation offload stakes in the company.
- The IPO comes amid ongoing moves nurturing Qatar’s financial markets ecosystem. In May 2023, the QIA announced that it will invest $275 million to establish a market-making initiative intended to boost liquidity by improving price discovery alongside incentivizing more foreign asset managers to invest in Qatar.
- In March 2023, Qatar’s financial center regulatory authority announced that the QSE plans to introduce a new derivatives market, while in June the exchange also introduced a new online trading platform with help from the London Stock Exchange Group.
- In February 2023, QSE inked a memorandum of understanding with the Saudi Tadawul Group to explore areas of cooperation, including working towards an agreement on cross-listing, among other areas. Tadawul has already successfully pursued other such partnerships, including with the Abu Dhabi Securities Exchange, or ADX, which resulted in Americana’s $1.8 billion 2022 IPO—the first ever dual-listing between the UAE and Saudi Arabia.
- Regarding other potential Qatari IPOs in the pipeline, the QSE’s acting CEO told the publication Zawya in June 2023 that the exchange was examining five potential deals, but that not all would necessarily materialize this year. A long-awaited Qatar Airways IPO won’t come until the end of this decade either, according to reports.
- There are still gaps hindering Qatar’s ambitions to achieve developed market status. Notably, foreign investors can’t participate in Qatari IPOs, although they’re allowed to trade shares in firms that are already listed.
- All public companies in Qatar can have up to 49% foreign ownership and some can have 100% non-Qatari ownership. Currently, 85% of listed shares are held by Qataris, according to QSE data.
- The QSE, which has a total market capitalization of about $166 billion across 50 firms, is significantly smaller than Gulf rivals: ADX’s market cap is about $758 billion and Tadawul’s is roughly $2.6 trillion.
- That said, ultra wealthy Qatar already far surpasses MSCI’s economic development criteria for classification as a developed market. It also exceeds company size requirements, which require at least five listed firms to have a market cap above $4.133 billion.
- However, according to MSCI’s 2023 market accessibility review, Qatar needs to improve in several areas to reach developed markets classification. Most notably, it needs to see improvements on foreign ownership levels and elements of market infrastructure. Saudi Arabia and the UAE also featured similar deficiencies in these areas.
- Qatar’s rising capital markets activity arrives as many were bullish on the Gulf’s IPO boom continuing into 2023. So far, the Middle East and North Africa has retained strong momentum despite weaker global sentiment in 2023, with the region producing 10 IPOs in Q1 with combined proceeds of $3.4 billion, according to Ernst & Young.
- Still, IPO activity outside the UAE and Saudi Arabia remained largely stagnant until Meeza’s IPO. A notable exception was Oman’s Abraj Energy Services, which raised $244 million in March. The offering was the Sultanate’s largest IPO in a decade.
Scenario 1: Qatar enjoys a listing spree
Energized by Meeza’s oversubscribed offering, several other Qatari companies launch IPOs in the second half of 2023 using the book building process, with a healthy listing pipeline heading into next year amid elevated investor demand.
Yet, additional flotations will likely take time to emerge and economic volatility could impact timelines. Although Qatar features attractive state-owned assets and family-owned businesses that could list, its IPO pipeline is less clear than the UAE or Saudi Arabia’s currently.
Scenario 2: Qatar nears developed markets classification in 2024
Coming months see Qatar quickly push ahead with additional reforms catering to foreign investors alongside introducing new market infrastructure. As a result, Qatar earns much higher marks in MSCI’s Market Accessibility Review in 2024.
That said, alongside addressing missing pieces, Qatar must also continue making significant progress even in areas where it currently has no major issues (like investor registration). Reclassification will take time.
It likely won’t take three more years to see another Qatari IPO. However, Qatar’s stock market is still playing catch-up on regional rivals, but Doha’s efforts to deepen its capital markets and attract foreign investment should pay off in coming years, while untapped demand for new flotations should inspire more companies to explore listings. In the short-term, there’s a good chance Qatar will make additional moves to smooth market access, with a logical next step allowing foreign investors to participate in IPOs. There’s also the possibility that QSE could advance agreements to collaborate with regional counterparts, setting the stage for better market liquidity and cross-listing potential.
Samuel Wendel is a senior market research analyst with Al-Monitor covering economic, tech and business trends across the Middle East. He has previously served as a journalist with Forbes Middle East and Wamda, where he reported on key industry developments spanning a range of sectors in the region.
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