Saudi firms pull IPO plans

Three Saudi companies have abandoned plans for initial public offerings (IPOs) within the next month due to concerns over weak investor demand, according to sources familiar with the situation. The decision indicates that these companies believe foreign investors remain cautious about investing in the kingdom’s stock exchange, which may deter other firms planning to go public in the near future. This move will negatively impact the owners of companies considering going public, including the Public Investment Fund (PIF).

The three companies — Berain Water, Petrolube, and Facilities Management Company — reached this decision in recent days, collaborating with the Capital Market Authority (CMA), the regulatory body. The CMA aims to ensure the success of the first IPOs under its new chairman, Mazen Al Sudairi. Berain and Petrolube declined to provide comments, while the CMA and Facilities Management did not respond to requests for comment.

Earlier this year, construction company Mutlaq Al Ghowairi canceled a share sale due to poor investor demand. This deal, which would have valued the company at $799 million, was the first major IPO to assess investor appetite in Saudi Arabia since the onset of the Iran war in February. PIF had intended to launch a series of stock offerings in companies it controls this year and next, relying on a stock market rebound to generate funds for new investments.

Companies that postpone their IPO plans have until the end of September to either finalize an offering or reapply for listing approval with the CMA. If they fail to do so, they must restart the process. The three firms that are delaying their IPOs have until September to either complete an offering or apply for listing approval again. Analysts expect them to reapply for IPO approval once market conditions improve.

Saudi Arabia's stock market has been volatile since the beginning of the Iran conflict, with the Saudi bourse recovering initial losses to be up almost 7% since the start of the year. However, the bourse has declined more than 12% last year. In comparison, the Dubai Financial Market has dropped nearly 3% over the same period, while the main Abu Dhabi index has increased by 0.4%.

The Saudi stock market regulator is currently examining the poor performance of recent IPOs to determine if the advice provided by investment banks contributed to their underperformance. The regulator aims to stimulate new listings and improve the overall market climate.