Saudi Arabia’s economic masterplan to wean its economy off a reliance on oil sales is showing up in one key area: equity offerings. A flurry of share sales by companies from tech startups to financial services firms is diversifying a stock market long dominated by banks and petrochemicals.
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(Bloomberg) — Saudi Arabia’s economic masterplan to wean its economy off a reliance on oil sales is showing up in one key area: equity offerings. A flurry of share sales by companies from tech startups to financial services firms is diversifying a stock market long dominated by banks and petrochemicals.
Fitness chain BodyMasters and car-rental firm Yelo are among the latest privately-owned firms firming up plans for initial public offerings on the country’s main exchange, according to people familiar with the matter, who asked not to be identified discussing private information.
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That adds to a list of IPO contenders, including a poultry producer and an airline, that are benefiting from reforms unleashed by Crown Prince Mohammed bin Salman as he looks to open the local economy, promote healthier lifestyles for citizens and attract more tourists.
“The market is getting to be a better representation of the economy and its depth is improving,” said Mohammed Al-Suwayed, chief executive officer at financial advisory Razeen Capital. “The more companies to invest in the more attractive it becomes.”
Saudi Arabia is spending hundreds of billions of dollars on its so-called Vision 2030 agenda to stimulate non-oil growth, create jobs and draw in foreign investors. Developing robust financial markets is a key part of that plan, with private firms increasingly joining the IPO pipeline alongside state-controlled firms as the government looks to monetize some of its assets.
Fifteen companies listed on the main bourse in 2024, the most since 2022, according to exchange operator Saudi Tadawul Group. Food and beverage listings saw the most robust activity, followed by commercial and professional services and health care.
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More diversity is expected from a “healthy pipeline” of equity offerings in the coming months, according to Ramez Halazun, head of equity capital markets at HSBC Saudi Arabia, a top arranger of local IPOs in 2024.
While the mix of deals reflect a changing Saudi Arabia, where consumers are eager to spend on social outings and better lifestyles, the government’s efforts to develop new manufacturing industries shows little sign of producing new major listings in the sector.
Last year’s biggest share sale was a $12 billion secondary offering by oil giant Saudi Aramco. There was no IPO activity in the energy space on the leading exchange.
Foreign Ownership Boost
Saudi Arabia’s sovereign wealth fund has listed several of its portfolio companies in recent years and is lining up offerings for at least three others, including the country’s biggest medical procurement company, Bloomberg has reported.
The rise in IPOs is giving the market more breadth in terms of sectors and ownership and “hopefully will allow investors to buy into more of that non-oil growth,” said Manpreet Gill, chief investment officer for Africa, Middle East, and Europe at Standard Chartered Plc.
“If we go back 15 years, the reason many global investors never allocated separate funds to the Gulf region was because it was primarily an energy correlated market, so you could just buy US energy sector equities,” he said.
Foreign ownership in Saudi Arabia has been on the rise over the past five years. The value of holdings climbed to about $90 billion in 2024, according to Tadawul.
The IPO boom across the wider Middle East in recent years has also boosted the region’s weighting in major stock indexes, helping to draw in more offshore investor funds, analysts have said.
Newly-listed companies in the kingdom have posted better early returns on average than those in neighboring exchanges over the past year. Broad market performance on the Saudi stock exchange, by contrast, lagged regional peers and many emerging markets in 2024.
Wellness company BodyMasters has now tapped Banque Saudi Fransi to pursue an IPO in Saudi Arabia, people familiar said, without giving further details. Car rental firm Yelo has hired Al Rajhi Bank to advise on a share sale, other people familiar said.
BodyMasters, Yelo and Al Rajhi Bank did not immediately respond to a request for comment. Banque Saudi Fransi declined to comment.
—With assistance from Matthew Martin.
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