RIYADH, 5 June 2004 — Sahara Petrochemical Company made history in shares flotation when its initial public offering raised a record amount of over SR37.5 billion, with its shares oversubscribed 125 times. “This shows that there is a huge liquidity in the market, while at the same time there is a pressing need for more local investment channels,” said Dr. Abdul Aziz Al-Dukheil, president of the Consulting Center for Finance and Investment, which managed the flotation of shares.
Al-Dukheil told Arab News that at the end of the ten-day flotation period they had received a total of 186,082 applications for subscription to six million shares. The flotation began on May 22 and continued till June 2. “During this ten-day period a total of 552,877 individuals subscribed to the shares and raised over SR37.5 billion as against the target of SR300 million by floating six million shares at the par value of SR50 each. In other words, the shares were oversubscribed 125 times. It is a record in the history of shares flotation, Al-Dukheil said.
He said another distinctive feature of the flotation was the transparency in the flotation process, with datewise subscription details available to the shareholders. “This way the public was kept informed of each day’s shares transaction and not left to do any guess work.” At the same time, Al-Dukheil pointed out, the overwhelming subscription underlined the acute shortage of investment channels for the huge liquidity in the private sector. “This phenomenon should engage the attention of the Saudi Arabian General Investment Authority (SAGIA) in opening up the market to investors,” he said.
The CCFI chief also underlined the need for curbing monopoly of some major shareholders. “Any market that does not have an element of competition leads to the creation of a monopoly by a few investors. A few individuals with a large number of shares could manipulate the prices to their advantage. We are not against people owning a large number of shares. But there should be an element of competition in the market in the larger interest of the shareholders,” he said.
Al-Dukheil expressed hope the setting up of the securities commission would lead to better market regulation under the new capital markets law. It also envisages the establishment of a stock exchange together with a “securities depository center” responsible for the settlement, clearing, depository and registration of securities traded in the market. Sources in the capital market point out that investment options for shareholders would open up once the National Company for Cooperative Insurance (NCCI), Maaden and National Commercial Bank’s shares are floated next year. The government-owned Public Investment Fund (PIF) currently holds 69.3 percent of shares in NCB, which has a capital of SR6 billion. Asked how much money has been siphoned back into the economy, a bank executive cited figures according to which Saudis withdrew an estimated $150 billion out of $600 billion in total US investment after Sept. 11. While part of it has flowed back into the Kingdom, the lion’s share of the funds has gone to banks in Europe and Japan.