Saudi Arabia: Publically listed companies to double by 2010

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The most active initial public offering (IPO) market and largest stock market by capitalisation in the Middle East is set to double over the next two years, according to Brad Bourland, Chief Economist at Jadwa Investment.

Bourland made the remarks during the 2nd Saudi IPO Summit which opened on, 11 November 2007 at the Four Seasons Hotel, Riyadh.

“Currently, there are 100 companies listed on the Tasi and I would expect that number to double within the coming two years. Being held in Saudi Arabia, this IPO Summit is creating a healthy environment for IPO partners and bankers to do business together for the benefit of the stock market and the wider Saudi economy."

Dr. Nassir Al Dawood, Deputy Governor of Riyadh, opened the summit, on behalf of its patron, Prince Salman Ibn Abdul Aziz Al Saud, Governor of Riyadh. Dr. Al Dawood, thanked delegates, speakers and sponsors for attending and stressed the great role that IPOs make in attracting FDI.

“Increasingly Saudi Arabian companies are using IPOs as a vehicle for raising capital. This is now attracting not only local but international investors, with overseas capital being drawn into the local market supplementing the existing high levels of liquidity.”

“With oil now touching US$ 96 per barrel, investors still have a healthy appetite for IPOs.  Strong GDP growth will drive the market and provide the stamina for numerous public offerings in the months ahead,” added Marwaha.

According to Ernst & Young, 20 Middle Eastern companies raised a total of US$3.9 billion in IPOs in the second quarter of 2007, of which Saudi featured two of the three largest offerings in the region worth a combined total of US$ 2.34 billion. Currently earning a fivefold return, the Saudi IPO market is expected to continue to grow as the kingdom's financial sector makes progress in liberalisation, regulations and standards.

Elsewhere on the summit’s opening day agenda, Mutlaq Hamad Al Morished, Chairman, of Saudi Kayan Petrochemical Company, delivered a case study of Kayan’s successful US$1.8 billion IPO.

Other case studies included Abdullah Al Fallaj, VP Finance, of publicly quoted Ma’aden (Saudi Mining Company) who is planning to raise an additional US$2.5 billion through an IPO. With its vast mineral wealth, mining is seen as the next investment boom in the Kingdom after, oil and real estate.

The summit also addressed the fundamental issues affecting IPOs, such as reasons for launching, essential management restructuring, conversion of family businesses and exit strategies.