Secondary Equity Offerings in MENA: A Tale of Two Approaches

Published in Chambers and Partners Equity Finance 2024

The Middle East and North Africa (MENA) region has seen a notable increase in primary equity capital markets activity in recent years, particularly through initial public offerings (IPOs) by UAE and Saudi issuers. IPO activity in these markets has grown faster than in any other Europe, Middle East and Africa (EMEA) region in the past few years. However, until early 2024, this surge in primary equity capital markets activity was not mirrored in the secondary markets, where underwritten secondary offerings remained relatively uncommon. This changed within the span of one week in May 2024, when two substantial underwritten equity offerings in the shares of Saudi Aramco and ADNOC Drilling brought secondary capital markets activity in MENA into the spotlight.

The Saudi Aramco and ADNOC Drilling secondary equity offerings followed distinct structures, reflecting the broader global dichotomy in the structuring of these transactions: the US approach, which requires the involvement of the US-listed issuer in underwritten secondary offerings by major shareholders (which are regarded as “affiliates” for US securities law purposes), and the European approach, where continuous disclosure regimes enable shareholders to execute underwritten secondary transactions without the issuer’s direct involvement. This article considers the philosophy underpinning both approaches, their suitability for MENA regions, and key considerations in structuring secondary trades following either approach.

Read the article here.