Saudi Arabia’s surge in initial public offering (IPO) listings is set to continue into the second half of the year, driven by strong investor demand underscored by robust economic reform, top corporate lawyers at international law firms in the Kingdom have told Law Middle East.
This follows analysis by Kuwait’s Financial Centre, also known as Markaz, indicating that more than half (59%) of total IPO proceeds in the Gulf Cooperation Council (GCC) were derived from Saudi Arabia, the largest economy in the GCC, in the first half of 2024.
Saudi Arabia raised US$2.1 billion from 19 offerings in the six months to the end of June. These included US$1.95 billion listed in its main market, Tadawul, and US$143 million in the parallel market, also known as Nomu.
Notably, this represents a 141% increase in value compared to the first half of 2023, according to the report.
“The Saudi capital markets continue to witness high growth across various sectors, primarily driven by large offerings of highly scalable government owned businesses, as well as businesses that have a compelling growth story linked with Vision 2030,” said Nawaaf Alawaad, a corporate associate at Kirkland & Ellis based in Riyadh.
Saudi Arabia’s ambitious economic diversification efforts have significantly broadened the market’s appeal.
These initiatives offer investors exposure to high-growth industries, positioning the Kingdom as an attractive destination for investment in sectors poised for substantial development and innovation.
“We are witnessing high demand from the investor side and note that a larger base of investors now consider Saudi Arabia as an attractive jurisdiction to deploy capital,” continued Alawaad.
“This is supported by the shift in focus by asset managers in the region, with recent announcements indicating that they are looking to expand their exposure to Saudi Arabia,” he said.
“We see these asset managers looking to pool investments from Saudi investors and deploying such investments in various ventures in the Kingdom, including those that are listed on the Saudi capital markets.”
Linklaters corporate partner Amro Bakhaidar said: “Saudi Arabia’s IPO market is experiencing remarkable growth, driven by the Kingdom’s ambitious Vision 2030 initiatives.”
Key sectors attracting strong investor interest include technology, healthcare, and financing, underscored by robust economic reforms and strategic investments, said Bakhaidar, who leads the Linklaters equities team in Saudi Arabia.
For example, Dr Soliman Abdul Kader Fakeeh Hospital Company’s listing on Saudi Arabia’s main market is the largest IPO in the GCC so far this year, raising US$764 million, and accounting for over a fifth (21%) of the total GCC IPO proceeds in the first half of the year.
“Government incentives and regulatory enhancements in the Kingdom have significantly improved the business climate, making Saudi markets particularly appealing for both domestic and international investors,” he said, adding:
“We anticipate an increase in IPO activities in the latter half of 2024 as these reforms continue to take shape and we are closely working with clients who are eager to capitalise on these opportunities.”
Overall figures show the GCC experienced a decline in IPO activity in terms of value in the first half of the year, with total proceeds amounting to US$3.6 billion from 23 offerings. This represents a 32% decline compared to the same period of the previous year.
But this should not be viewed as a slow down in demand across the region, according to Salman Al-Sudairi, a capital markets partner at Latham & Watkins in Riyadh, who has advised on nearly every major IPO in the Kingdom since 2011, including most recently the IPOs of Rasan and Miahona.
“The year-on-year decline in deal value between the first half of 2023 and the first half of 2024 should not be viewed as a slow down in demand, as there were a few outsized deals that skewed the number,” he said. “The pipeline is stronger than I have ever seen it in the region, and the appetite for additional deal is there.”
“We are seeing a lot of activity in the market, and many calls and RFPs [requests for proposals] from companies that are looking to list,” said Al-Sudairi, who is chair of the firm’s Saudi Arabia practice and office managing partner for the Middle East and North Africa. “It is particularly strong in the Saudi market, but generally strong in the rest of the region as well. What is also very interesting is the diversity and sophistication of the companies that are looking to list.”
The IPO market in the Middle East is therefore poised for continued strength in 2024, with Saudi Arabia emerging as a dominant force in the region.
