Saudi's Tadawul has 23 firms waiting to list, market regulator says

The kingdom's stock market registered a strong year for IPOs in 2022, with companies raising $10.66bn

The Saudi Stock Exchange (Tadawul) in Riyadh. Reuters

Saudi Arabia has 23 companies waiting to list on the country’s stock exchange, the chairman of the Capital Market Authority said on Sunday.

The companies “are essentially on the runway waiting for the appropriate time, and obviously market conditions”, said Mohammed ElKuwaiz, during the Saudi Capital Market Forum.

The Saudi market regulator is currently “reviewing” 77 applications for an initial public offering (IPO), and there are 70 signed mandates with financial intermediaries and advisers in the early part of the process, Mr ElKuwaiz said.

“If you look at this, in tandem, it gives us an indication that we have a very healthy pipeline. Obviously, all of this is contingent on market forces and economic forces as well.”

Last year was a “record” year for Saudi Arabia’s capital markets, with companies raising about 40 billion Saudi riyals ($10.66 billion) from IPOs, Mr ElKuwaiz said.

The amount is the highest raised by the market in any single year, excluding 2019, when Saudi Aramco raised more than $29 billion in a record-setting IPO, he added.

Unlike global markets that have had subdued investor sentiment amid soaring inflation and recession fears, the GCC region enjoyed strong IPO activity in 2022.

The total number of IPOs issued in the region jumped to 48 in 2022 from 20 in 2021, Kamco Invest said.

Saudi Arabia, the Arab world's largest economy, maintained its leadership position for IPO issuances from the region in 2022, as 34 out of the 48 GCC IPOs debuted on either the Tadawul or the Nomu, it said.

Meanwhile, proceeds for 2022 from GCC issuers went up by 3.1 times to $23.38 billion, from $7.52 billion in 2021, data from Bloomberg and stock exchanges showed.

Restaurant-operator Americana, which raised $1.8 billion from its listing last year, was the first company to be dually listed in the kingdom and the UAE.

The CMA is “likely” to create a regulatory framework for dual listings following Americana, which was a pilot, said Mr ElKuwaiz.

“We are continuing to entertain additional pilots and we are seeing a lot of interest.”

Looking ahead, the market for IPOs in the GCC looks strong, with between 27 and 39 companies expected to float their shares in the region this year, Kamco Invest said.

However, with growing interest for listings, the CMA is also issuing a “large number of rejections”, Mr ElKuwaiz said.

“The CMA has, for the first time, started to actually reject files that do not meet disclosure and governance standards,” he said.

“Our expectation is that this rejection trend is likely to continue [and] possibly even increase as the number of files may not necessarily be ready to fulfil disclosure and governance standards going forward.”

Foreign participation in the kingdom’s markets is also rising, with international investors representing 15 per cent of the free float — shares that can be publicly traded, said Mr ElKuwaiz.

“We're continuing to see a rapid increase in the proportion of foreign investors, both in terms of the percentage of ownership as well as the percentage of trading and velocity,” he said.

“IPO activity is actually a main driver for foreign interest and foreign investment activity.”

At a separate session on Sunday, Nasdaq chief executive Adena Friedman also noted that the IPO environment is “vibrant in Saudi Arabia”.

“This region is one of the fast-growing in the world. Saudi has done a tremendous job of bringing capabilities into the market so they can compete with global mature markets. It’s a testament to the amount of focus, energy and leadership in the country,” she said.