Tadawul has a 'healthy' IPO pipeline despite Covid-19 challenges, CEO says

The Arab world's biggest bourse will review its own listing plans in the first quarter of next year

(FILES) A file photo taken on December 12, 2019 shows a view of the exchange board at the Stock Exchange Market (Tadawul) bourse in Riyadh displaying Aramco shares on the second day of their trading. Energy giant Saudi Aramco said on Sunday its net profit for the second quarter plunged a massive 73 percent year-on-year due to sharply lower oil prices.
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Saudi Arabia’s Tadawul stock exchange, the biggest Arab bourse, has a strong pipeline of initial public offerings and may accelerate the listing of its own shares despite challenges presented by Covid-19, its chief executive said.

The exchange has already welcomed six new companies this year and there are at least “four-to-five IPOs under review”, Khalid Al Hussan told Bloomberg TV in an interview on Tuesday.

“This year and potentially next year, it is [a] surprisingly very healthy IPO pipeline for the Saudi market despite Covid-19,” he said, adding that companies are accessing the market for funds at a “challenging time” to get the full benefits of heightened investor interest.

The bourse, like its international peers, has seen an increase in participation from retail investors during Covid-19. Tadawul’s daily traded volumes have risen about three-fold on average and its daily traded value has climbed to $1.7bn (Dh6.24bn) during the Covid-19 pandemic, from about $700 million to $800m previously.

“Like other markets are witnessing ... retail investors are [also] active in Saudi market.”

Grocery retailer BinDawood Holding is among the firms looking to go public on the exchange. The kingdom's third-largest grocery retailer plans to sell 22.86 million existing shares as part of the offering, representing about 20 per cent of its capital. The share price will be set at the end of the book-building period, the company said on Monday.

"Given the strong performance of the company and the circumstances with the Covid-19 ... many investors are looking for the best opportunities in the market and I believe that BinDawood Holding is one of those," Ahmad Abdulrazzaq BinDawood, chief executive of the company, said at the time.

Globally, the Covid-19 pandemic has caused a "significant slowdown" in activity in IPO markets, according to consultancy EY. The number of IPOs fell 39 per cent in the second quarter to 186 listings, however, there were "clear signs" of recovery in June.

In the Middle East and North Africa (Mena), IPO activity was 11 per cent lower by volume and 43 per cent lower by proceeds in the first half of 2020. EY expects “investor sentiment to remain cautious” in the second half of 2020.

Tadawul, which is among the top 10 global stock markets, may accelerate its own IPO – which Mr Hussan said in July would take place within 24 months – after the successful launch of a derivatives market and a central clearing house this week.

“We will access that in the first quarter of 2021 … it is going to be on a shorter time [scale than] the 24 months [previously stated],” he said.

“The derivatives market [and the] start of Saudi Clearing House are big transformations and it would accelerate the timeline [of the IPO], but not necessarily in 2021,” he added.

Saudi Arabia allowed trading in derivatives from August 30, as it broadens its product offerings to increase liquidity and attract more foreign direct investment. The first exchange-traded product is the Saudi Futures 30 index futures contract, which is based on the MSCI Tadawul 30 index.

The bourse now plans to introduce futures contract in single stocks in the first six months of 2021, Mr Al Hussan said.