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Saudi Tadawul on IPO path, one among many mega listings on the exchange in 2021

Saudi Arabia's bourse, Tadawul, has invited banks to pitch for roles in its highly-anticipated flotation. Building on a massive 2020, Tadawul will attract more mega listings this year as well

Tadawul collected $1.46 bn in share sale proceeds last year despite the pandemic Tadawul introduced new initiatives including direct listings on Nomu parallel market, and derivatives SABIC, the kingdom’s petrochemical giant, is said to be considering an IPO this year

Saudi Arabia’s bourse, Tadawul, has invited banks to pitch for roles in its highly-anticipated flotation, sources told Reuters recently.

With a market capitalization of $2.5 trillion, Tadawul is the Arab world’s largest stock exchange.

Tadawul hired HSBC in 2016 to manage an initial public offering (IPO) initially planned for 2018 but put that on hold due to oil giant Saudi Aramco’s record $29.4 billion listing at the end of 2019.

Once completed, it would make it the third publicly listed stock exchange in the region after the Dubai Financial Market and Boursa Kuwait.

A timeline for an IPO would be provided this year, Tadawul’s chief executive Khalid Alhussan told Reuters in January.

Alhussan said 2020 was a good test for the Saudi market when, despite the COVID-19 pandemic, liquidity tripled, there was a 26% increase in the number of qualified foreign investors opening portfolios, and more than 100,000 local investors joined the stock market.

2020 performance

The bourse has benefited from Aramco’s 2019 IPO listing.  

Tadawul collected 5.5 billion Saudi Riyals ($1.46 bn) in share sale proceeds last year despite the pandemic.

It represented a 34% increase on 2019, excluding the bumper 2019 Aramco IPO, said Mohammed ElKuwaiz, chairman of the Capital Market Authority, according to the Al Eqtisadiah.
 The chairman said that the market also witnessed remarkable growth in debt sales, with about 200 Saudi Riyals bn ($54 bn) raised during 2020, compared to 120 billion Saudi Riyals ($32 bn)  in 2019, a 65% growth.

Read: Aramco selling more assets and facing serious OPEC production competition

Read: Silicon Valley’s pre-IPO deal flow and the millions made by Indian, and GCC investors

An IPO leader

Saudi Arabia continued to lead the IPO market in the MENA region, according to the latest industry figures by consultancy firm Ernest and Young’s (EY) ‘MENA IPO Eye Q4 2020 report’.

“Tadawul was MENA’s top listing venue for the year with four listings totaling $1.45 bn, which represented 78% of the total amount raised by MENA IPO candidates in 2020,” EY said.

The fourth quarter of 2020 was the strongest for IPOs based on proceeds, primarily due to the listing of BinDawood Holding ($584 million), which was the second-largest listing of the year after Dr. Sulaiman Al-Habib Medical Services Group Company ($701 mn), which listed in the first quarter of 2020.  

Saudi Arabia also saw several new initiatives including the introduction of direct listings on the Nomu parallel market, as well as the launch of their derivatives market.

New IPO Deals

The Kingdom is expected to see more than ten listings in 2021. 

The decision to float Aramco’s shares on Tadawul and to largely forgo international investors sparked concerns that the Greenshoe Option exercised after selling 480 million additional shares and raising the IPO from $25.6 bn to $29.4 bn deal would soak up all the available local liquidity for years. That fear has turned out to be unfounded.

Saudi was the busiest listing venue among the Gulf Cooperation Council, whose five other members suffered a near-complete drought with only one firm in Kuwait going public, according to Bloomberg. 

Still, the Tadawul trails Europe’s most active exchanges by far, with London seeing $10.7 bn worth of listings and counting.

In October 2020, Tadawul tripled the daily trading limits to 30% for companies making their debut to boost post-listing liquidity.  

Saudi Basic Industries Corp. (SABIC), the kingdom’s petrochemical giant, is said to be considering an IPO of its multibillion-dollar specialty chemicals unit that could happen this year

Saudi Telecom said it plans to spin off and list as much as 30% its internet-services unit late 2021. 

Shatirah House Restaurant Co. is eyeing a listing on the junior Nomu-Parallel market, according to Arab News.