Saudi IPOs Garner Record SR659 Billion in Orders
Saudi companies have hit a milestone with SR659 billion ($176 billion) in orders for their initial public offerings, showcasing a surge in investor interest in the returns processed over the past two years. This surpasses the previous record set by Saudi Aramco in 2019 and is reshaping the broader market landscape.
Market Impact and Investor Behavior
The Tadawul All Share Index, tracking the Kingdom’s stock market, has dipped nearly 8 percent from its peak in March as cash is being held onto for these new offerings, impacting its performance compared to other emerging markets. Marwan Haddad from Azimut highlighted the rush to the market, indicating a notable surge in demand.
Leading the IPOs in the MENA Region
Saudi Arabia is poised to take the lead in IPOs within the Middle East and North Africa region by 2024, with 27 companies looking to list on the Kingdom’s main market. The IPO pipeline in the MENA region appears promising this year, with several companies postponing listings to 2024 for better market conditions.
Strong Demand and Oversubscription
Recent IPOs like Dr. Soliman Abdul Kader Fakeeh Hospital Co., Saudi Manpower Solutions Co., Rasan Information Technology Co., and Miahona have seen staggering orders, reflecting high demand driven by various factors like hedge fund managers, retail investor appetite, and digital subscription ease. Oversubscription levels have caused frustration due to reduced allocations.
Impressive Performance and Investor Interest
Data reveals that many companies going public in the last two years have seen significant first-day trading increases, with over half ending above the offer price. The strong performance of these IPOs, with an average return of 32 percent, has attracted both retail and institutional investors.
Diversification and Regulatory Changes
The Kingdom’s initiative to diversify its stock exchange has also bolstered demand for new listings, adding sectors beyond banks and chemical companies. The Capital Markets Authority’s revision of book-building regulations in late 2022 aims to ensure genuine demand is reflected in order books without inflation from leverage.
Continued Interest in Saudi IPOs
The sustained and growing interest in Saudi IPOs is evident from recent figures, contrasting with Saudi Aramco’s record IPO in 2019. The strong returns from recent IPOs have attracted investors despite challenges like reduced allocations and oversubscription levels.