Islamic Finance

Saudi Exchange revamps corporate structure, targeting IPO

Published 07 Apr,2021 via Bloomberg Markets - Saudi Arabia’s stock exchange, the largest in the Middle East, announced a reorganization of its corporate structure as it prepares for a highly anticipated initial public offering this year.

The newly created Saudi Tadawul Group will have four subsidiaries, comprising the exchange, a clearing center, a depository company and a technology-services business. The changes create the “necessary platform” to strengthen the group’s infrastructure before the IPO this year, company officials said in a virtual event Wednesday.

Saudi Arabia has been the hottest market for IPOs in the Middle East over the past two years, with new offerings oversubscribed, mostly by local retail and institutional investors. In 2019, the bourse hosted the $29 billion offering of the world’s biggest oil producer, Saudi Aramco, with shares being sold mostly to Saudi investors seeking guaranteed dividends.

Once completed, the reorganization would make it the third publicly listed stock exchange in the Gulf after the Dubai Financial Market and Boursa Kuwait. The exchange hired HSBC Holdings Plc in 2016 to manage its flotation. In March, Reuters reported that bourse has invited banks to pitch for its IPO.

Sarah Al-Suhaimi will chair the new group, while Khalid Abdullah Al-Hussan will be the group’s chief executive officer. Mohammed Al-Rumaih, who has been serving as the chief of markets at the bourse, was elected as the CEO for the Saudi Exchange, previously known as Saudi Stock Exchange Company Tadawul.

The Tadawul All Share Index, composed by 198 members, is up 15% this year, versus a 4% increase for the MSCI Emerging Markets Index.

  • The Tadawul is owned by Saudi Arabia’s Public Investment Fund, the sovereign wealth fund. It has a capital of 1.2 billion riyals ($320 million), divided into 120 million shares, according to its website.
  • The Saudi exchange posted a net income of 153 million riyals in 2019, when earnings before interest, taxes, depreciation and amortization reached 205 million riyals.
  • The total value of shares traded in Riyadh last year reached $557 billion, a jump of 137% versus the previous year, according to the exchange’s annual report. That compares with about $18 billion in the Dubai Financial Market PJSC, which posted a 24% increase in total traded value last year.
  • Compared with Saudi Arabia’s $2.5 trillion size, the United Arab Emirates exchanges have a combined market capitalization of $329 billion and Kuwait has $103 billion.

(Adds stock performance and exchange details at the bottom)

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Reema Alothman, Filipe Pacheco and Matthew Martin