Saudi IPO Summit set to boost investor confidence

The conference is intended to stabilise the market and help restore investor confidence after a volatile performance in the first half of this year.

The bullish performance of the Saudi stock market in 2005 had been powered in the main by 6.5 per cent economic growth, excess liquidity, a current account surplus of US$ 87 billion, positive corporate results and robust investor confidence. The Tadawul All-Shares Index (TASI) finished the year up over 60 per cent at 16,712 points and market capitalisation registered robust growth of 110 per cent, to stand at over US$ 645 billion.

Projections for 2006 were buoyed by the added stimulus from the Saudi government's privatisation programme, led by divestures in Saudi Arabian Airlines, Saudi Telecoms Company (STC) and Saudi Basic Industries Corp (SABIC) which pushed the index up a further 17 per cent to an all time high of 20,634 points in late February and market capitalisation raced to US$ 800 billion. However just six companies accounted for almost 55 per cent of total market capitalisation and overpriced small-cap speculative stocks were leaving the entire bourse vulnerable, some trading at over six times their book value.

These concerns were realised on March 20 when shares dipped below 15,000 points and traders were faced with a another sea of red when trading closed on May 11 as the bourse plummeted to a 14 month low of 10,046 points. That was less than half of the euphoric highs recorded just three months prior and wiped US$ 350 billion off share values.

One critical factor highlighted by traders was that there were still less than 90 stocks available a paradox considering the colossal amount of funds seeking investment opportunities. In light of recent gains, the government has now reiterated its range of initiatives aimed at stabilising the market with IPOs integral to that plan.

More than 30 initial public offerings are already expected to be introduced within the next 12 months. Indeed, Emaar Economic City recently announced that it will float 30 per cent of its US$ 2.27 billion share capital to facilitate financing of the new US$ 27 billion King Abdullah Economic City, one of the largest development projects in the region.

Deep Marwaha, Conference Manager for Saudi IPO Summit said, "It was against this backdrop, that the idea for Saudi IPO Summit 2006 was conceived. Over 90 per cent of private companies in Saudi Arabia are family-owned and represent great potential for future listings"

The summit will feature leading figures in the financial and investment industry and will examine the role IPOs can play in broadening the total number of stocks available and improving investor confidence. It will also provide essential information to private companies looking to go public, many of which are family businesses.

Debate and discussion amongst investment experts, regulators and market leaders will centre on regulatory and industry standards, corporate governance and transparency, reporting standards and internal audit, management changes and restructure. It will also address the costs associated with IPOs and the long-term obligations of public companies as well as the critical factors underpinning oversubscriptions, over-pricing and macro-economic issues affecting IPOs.

Two dedicated workshops have also been organised and will go in depth on comparative pricing mechanisms and most importantly for private companies, an IPO feasibility study which will assess how to prepare for listing.

An impressive line-up of international and regional financial experts are expected to speak at the event including amongst others, HE Dr. Fawaz Al Alamy, Deputy Minister of Commerce & Industry, KSA, Dr. Abdulrahman Al Zamil, Chairman, Zamil Group, Yassir Rumayyan, Head of Listing, Capital Market Authority, KSA, Abdulilah Aldrees, CEO, Aldrees Petroleum And Transport Services Company, Ioannis Karapatakis, Managing Director - Global Investment Banking Advisory, HSBC, Omar M. El Quqa, Executive Vice President - Corporate Finance & Treasury, Global Investment House, Brad Bourland, Chief Economist, SAMBA and Graham Dallas, Head of North America, Europe, MENA for Business Development, London Stock Exchange.

"The Saudi bourse represents almost half of the total capitalisation of all Arab stock exchanges and many experts believe it has the prospect to grow to the size of India's stock market. To achieve this potential private investors, heads of family-owned companies, investment bankers and government regulators, must gain a common understanding of the true nature of IPOs," commented Deep Marwaha, IIR.