Majority of UAE Investors Favor Real Estate IPOs, Survey Finds

The UAE market accounted for an impressive 58 percent of IPO proceeds in the GCC region in 2023

Real estate initial public offerings (IPOs) have become highly favored among UAE investors. Approximately 51 percent of investors in the UAE showed a preference for IPOs in the real estate sector, followed by technology at 41 percent and healthcare at 33 percent.

As the market in the UAE continues to mature and expand, investor preferences have evolved. Investors in the UAE prioritize new issuers with organic growth investment strategies as the primary use of proceeds. Moreover, they seek companies with robust free cash flow and lower levels of debt. According to Edelman Smithfield’s UAE Investor Pulse Survey, investors are also advocating for increased transparency and more frequent medium-term guidance on a quarterly basis.

UAE’s Growing IPO Market

Despite global economic challenges in 2023 such as high interest rates, inflation, and geopolitical tensions, the UAE’s IPO market showed remarkable resilience, contributing 58 percent of the total IPO proceeds in the GCC region.

This resilience is attributed to increasing investor interest and a robust IPO pipeline in the UAE. The presence of two stock exchanges, ADX and DFM, further enhances the UAE capital markets by offering diverse investment opportunities. The survey also highlights UAE investors’ confidence in the fair valuation of newly listed firms and their support for the bookbuilding process.

The strong investor appetite is reflected in the fact that 84 percent of UAE investors are inclined to participate in IPOs again. Additionally, 67 percent recognize the advantages of having two distinct exchanges in the UAE capital markets. Furthermore, 71 percent of investors perceive the book-building process as an efficient mechanism for determining fair market prices compared to fixed pricing.

Profitability Stands Out as a Crucial Evaluation Criterion

For UAE investors considering a company’s public offering, profitability ranks highest. Following closely are a strong balance sheet, brand recognition, the predictability and consistency of revenue, and the scalability of the business model.

Clear communication during the IPO process plays a crucial role in shaping investment decisions, with 65 percent of UAE investors emphasizing the importance of transparency.

Looking towards broader perspectives, 53 percent of UAE investors express that a well-defined ESG (Environmental, Social, and Governance) strategy positively influences their decision to invest in new listings. Additionally, 57 percent acknowledge that recent board refreshment within the past two years enhances their confidence in new listings. Moreover, 59 percent believe that board diversity also positively impacts their inclination to invest in new listings.