Saudi Arabia IPO subscriptions decline 53% in 6 months
The subscriptions to IPOs (initial public offerings) in the Saudi stock market dropped drastically during the year, according to a recent economic study.
"The total amount of IPO subscriptions since the beginning of the year till June fell to SR 1.2 billion, accounting for 53 percent compared to SR 2.5 billion in the same period last year," the study published by Al-Eqtisadiah business daily said yesterday.
The study was made after the completion of the fourth IPO for the American International Group and Arab National Bank Cooperative Insurance Co. (AIGANB) early June.
The report attributed the drop to the lower capitalization of the companies that launched IPOs this year compared to the companies launched last year.
The other companies launched in the year are Northern Cement, Medical Care and Al-Jazira Takaful of Bank AlJazira.
Only Saudi citizens are allowed to subscribe for IPOs. Small Saudi investors in the share market prefer to subscribe to IPOs because of the price fluctuations of the initial day. The shares of Northern Cement made a leap of 200 percent on the first day of IPO to close at SR 30 while Medical Care jumped to 352 percent at SR 122 per share.
However, the trend is likely to change because of a decision of the Capital Market Authority (CMA) to limit the fluctuation of share value on the first day to 10 percent. The decision is likely to dampen the demand for IPOs in the future. No new company has launched an IPO after the latest CMA decision.
Northern Cement with a capital of SR 1.8 billion leads the listed four companies since the beginning of the year. It offered 90 million shares on IPO, half of its total shares, at a nominal value of SR 10 per share.
Medical Care with a capitalization of SR 448.5 million launched 13.5 million shares worth SR 135 million on IPO, accounting for 30 percent of its total shares, at the rate of SR 27 nominal value per share.
Aljazira Takaful, with a capital of SR 350 million, offered 10.5 million shares worth SR 105 million on IPO accounting for 30 percent of to its shares at a nominal value SR 10 per share. AIGANB with a capital of SR 175 million launched 5,250,000 shares accounting for 30 percent of its total shares at a nominal value of SR 10 per share.
In the same period last year IPOs of four companies were launched. Al-Tayyar for Travel and Tourism was subscribed SR 1.37 billion, Najran Cement SR 850 million, Takwin Co. SR 234 million and Alinma Tokyo Marine SR 60 million, the study said.
The total lPO was valued at SR 5.3 billion in 2012 and SR 1.7 billion in 2011. The highest amount of IPO in Saudi stock market was SR 36.4 billion in 2008, the study said.
The stock market grew at the rate of 8 percent since the beginning of the year till June 16 to reach 7,330 points gaining 529 pints compared to the end of last year when it registered 6,801 points, the study said.