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Saudi Arabia’s stock exchange gets a revamp ahead of IPO this year

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Investors monitor a screen displaying stock information at the Saudi Stock Exchange (Tadawul) following the debut of Saudi Aramco’s initial public offering (IPO) on the Riyadh’s stock market, in Riyadh, Saudi Arabia, December 11, 2019.

Ahmed Yosri | Reuters

Saudi Arabia’s stock exchange, the Tadawul, has announced its conversion into a holding company with four subsidiaries as it prepares for an initial public offering this year.

“The setup that we have, the market momentum, our financial performance, all of these indicators just give us the comfort to say this is the right time to float the company and to be among developed exchanges and listed also on their platforms,” Saudi Tadawul Group CEO Khalid Al Hussan told CNBC’s Hadley Gamble after the announcement Wednesday.  

The Tadawul All Share Index, made up of 198 companies, is up 15% year-to-date. And investors who’ve accumulated cash during the course of the pandemic are looking for places to put it. 

The new parent company is now called the Saudi Tadawul Group, instead of Tadawul, with four portfolio companies: the Saudi Exchange (its stock exchange business previously known as the Saudi Stock Exchange Company – Tadawul), a securities clearing company, a securities depository company, and Wamid, a new technology services business focused on innovation in the Saudi economy.  

This is all in the effort to further develop the $2.5 trillion stock market’s infrastructure before listing. The Saudi exchange is among the 12 largest globally.  

It’s also aimed at attracting foreign investors and diversifying investment opportunities, the core mission of the kingdom’s Vision 2030 plan to modernize its economy and reduce its dependence on oil. 

“The transformation of Tadawul into a holding group structure is another important step forward in the ongoing development of the Saudi capital market, its infrastructure and members’ offerings,” the Saudi Tadawul Group said in a statement Wednesday. 

Details on what percentage will be floating and who will be able to invest are still in the works, the CEO said.  

Saudi arabian flag in Asir province, Abha, Saudi Arabia.

Eric Lafforgue/Art in All of Us | Corbis News | Getty Images

“We are in a very early stage of that decision and the structure of the IPO the regulatory framework set 30% as a minimum float,” Al Hussan said. “However, we have seen in the last two years CMA (Capital Market Authority) approving lower percentage than 30%. Depends on the size, depends on the condition of the market, and depends on the demands.”

As for the company’s valuation, a topic of much interest to investors, Saudi Stock Exchange Chairwoman Sarah Al-Suhaimi told journalists “we will announce it at the right time inshallah.”  

Saudi Arabia has been home to a number of regional IPOs in recent years, most notably the $29.4 billion listing of a tiny fraction of state oil giant Saudi Aramco, which at the time became the world’s most valuable publicly-traded company.  

2020 was also a bumper year for Saudi IPOs despite the Covid-19 pandemic, seeing four Gulf-based companies list on the Tadawul and raising a combined $1.45 billion, Reuters reported, putting it ahead of Germany’s combined IPOs last year which raised $1.3 billion.  

The two largest regional companies in the region to go public in 2020 were Sulaiman Al Habib Medical Services and BinDawood Holding, both listing on the kingdom’s main exchange, while several more are reported to be preparing listings for 2021, a pipeline Al Hussan expects to be “historic.” In 2019, the Tadawul completed its full inclusion on the MSCI emerging markets index. 

Asked if the Saudi Exchange would IPO before December, Al Hussan replied, “of course.”

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