Saudi IPO Market Booms with Record Orders

Saudi companies have recently witnessed a surge in demand for their initial public offerings (IPOs), with orders totaling SR659 billion ($176 billion). This significant amount of orders reflects a strong investor interest in the returns generated in the past two years. The interest in IPOs has surpassed the previous record set by Saudi Aramco in 2019, impacting the broader market. The Tadawul All Share Index, which monitors the Kingdom's stock market, has experienced an 8 percent decline from its peak in March, partly due to investors holding onto cash in anticipation of these new offerings.

In 2024, the IPO market in Saudi Arabia is expected to lead the way in the Middle East and North Africa region, with 27 companies planning to list on the main market. The IPO pipeline in the MENA region for this year looks promising, as several companies have postponed their listings to early and mid-2024 for more favorable market conditions. Notable recent IPOs include Dr. Soliman Abdul Kader Fakeeh Hospital Co., Saudi Manpower Solutions Co., Rasan Information Technology Co., and Miahona, all of which attracted substantial orders.

The high demand for these IPOs can be attributed to various factors, including the influx of hedge fund managers, strong interest from retail investors with leverage from banks, and the convenience of subscribing through digital platforms. However, oversubscription levels have led to frustration among investors due to reduced allocations. Recent IPOs have performed well, with many companies experiencing significant increases on their first trading day.

The positive returns from recent IPOs have attracted both retail and institutional investors, driving the demand for new listings. The Kingdom's efforts to diversify its stock exchange have also played a role in the strong demand for IPOs. The Capital Markets Authority's revisions to book-building regulations aim to ensure genuine demand is reflected in order books, reducing the impact of leverage on oversubscription levels.

The sustained and growing interest in Saudi IPOs is evident from the substantial orders received by companies in recent years, highlighting the attractiveness of the market to investors.

The surge in demand for IPOs in Saudi Arabia reflects a positive trend in the market, attracting both local and international investors. With a strong pipeline of companies planning to list in the coming years, the Saudi IPO market is poised for continued growth and offers promising opportunities for investors seeking to capitalize on the region's economic development.