RIYADH, 19 November 2006 — Around 400 industry professionals have registered for the Saudi IPO summit 2006, which opens in the capital today.
Co-sponsored by the Riyadh Chamber of Commerce & Industry (RCCI), the two-day conference intends to stabilize the market and help restore investor confidence after a volatile year, which recently saw the Tadawul All-Share Index (TASI) drop to a 21-month low of 8,019 points.
“Debate and discussion will take place amongst investment experts, regulators and market leaders,” said Deep Marwaha, conference manager for Saudi IPO summit said. “To restore investor confidence and stabilize the markets, they will focus on regulatory and industry standards, corporate governance and transparency, reporting standards and internal audit. The Saudi bourse has great potential, but to achieve that potential private investors, heads of family-owned companies, investment bankers and government regulators, must gain a common understanding of the true nature of IPOs,” Marwaha added.
The performance of the Saudi stock market in 2005 saw the TASI finish the year up over 60 percent at 16,712 points and market capitalization registered robust growth of 110 percent, to stand at over $645 billion.
But concerns that six dominant stocks accounted for over half of total market capitalization and overpriced small-cap speculative stocks were realized earlier this year. By May 11, traders were faced with a sea of red when the bourse plummeted to a 14-month low of 10,046 points. That was less than half of the euphoric highs recorded just three months prior. On Nov. 11, stocks slumped still further to 8,019, wiping over $300 billion off share values.
Despite less than 90 companies being listed on the TASI, given the phenomenal amount of funds seeking investment opportunities, private companies are stalling on planned IPOs due to the irregular pattern of the Saudi bourse and low investor confidence. Analysts believe that strong underlying economic indicators such as 6.5 percent economic growth, excess liquidity, a current account surplus of $87 billion and positive corporate results should run at an accelerated pace.
The summit will examine the role IPOs can play in broadening the total number of stocks available and improving investor confidence. It will also provide essential information to private companies looking to go public, many of which are family businesses. The event will also address the costs associated with IPOs and the long-term obligations of public companies as well as the critical factors underpinning over-subscriptions, over-pricing and macro-economic issues affecting IPOs.