Is Prince Alwaleed's IPO another signal of a global market top?

In an interview with AME Info sister publication Middle East Economic Digest he revealed plans to float his Kingdom Holdings on the Saudi bourse in what would be its largest ever IPO.

The new market regulations mean that the price of the sale will be set by a book building process, as in most global stock markets. But in the MEED interview Prince Alwaleed confirmed that the IPO is to be closed to non-Saudis.

It is not yet clear what size of shareholding will be offered in the IPO. Samba Financial Group, partly owned by Kingdom Holdings, will be financial adviser for the huge IPO which could raise $7 billion on some estimates, dwarfing any previous local issue.

Selling stakes

Kingdom Holdings joins a growing list of private equity groups now looking to sell shares at a time of booming global stock markets. Last week, for example, China announced it is paying $3 billion for a 10 per cent stake in the US private equity firm Blackstone Group.

Prince Alwaleed told MEED: 'We always wanted to go public. I always wanted to assist my country, so that is why I decided to put everything here.'

However, Prince Alwaleed is not known as the Arabian Warren Buffett for nothing, and doubtless has excellent investment reasons for such a bold move which go beyond philanthropic nationalism.

He must hope that the Kingdom Holdings IPO will restore confidence in the Saudi Arabian bourse which has lost more than half its value in a vicious stock market crash over the past year. That would, of course, necessarily entail an upward revision of the value of Kingdom Holdings at a time when its publicly quoted investments in global markets may come under pressure.

Ambitious IPO

Whether such an IPO can be pulled off successfully in a bombed out stock market like Saudi Arabia in the middle of summer is a calculation that Prince Alwaleed is well qualified to judge.

But for private investors mulling their own portfolio decisions you have to wonder about the wider message that sales by the like of Blackstone and now Prince Alwaleed send to the market. Are these not just some of the world's brightest and most successful private investors looking to unload huge shareholdings before the investment world falls apart?

You have only to consider the disjunction between record global stock market levels and the slowing US economy to see the writing on the wall.

The US housing crisis is a cancer spreading throughout the body economic. And a hard and not a soft landing for the US economy was predicted by another global investor George Soros in his book 'The Age of Fallibility' over a year ago. Perhaps he will be proved right.