SPACs may reshape Gulf financial markets

Special SPACs may reshape Gulf financial markets
Last week, Abu Dhabi’s stock exchange, known as ADX, introduced its first SPAC framework, paving the way for these types of firms to launch on the bourse. (Reuters/File)
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Updated 10 March 2022

SPACs may reshape Gulf financial markets

SPACs may reshape Gulf financial markets
  • Blank check companies allow for diversification, says former DIFC chief economist

RIYADH: SPACs may reshape Gulf financial markets, bringing together savvy investors and disruptive startups.

Last week, Abu Dhabi’s stock exchange, known as ADX, introduced its first SPAC framework, paving the way for these types of firms to launch on the bourse.

A SPAC, also known as a blank check company, is a special purpose acquisition company that goes public despite having no real business. It raises money from investors to buy into another company, but backers may not necessarily know the name of a specifically targeted firm, just general areas the acquisition company is interested in buying into.

“SPACs also allow for diversification in listed sectors, which are too concentrated on banks, real estate, and telecoms,” former chief economist of the DIFC business district Nasser Saidi told Arab News. “They will bring support for startups, especially those in disruptive sectors and later-stage growth companies.

“Target companies will certainly include promising technology ones, financial technology firms, the media industry, and health and education, as well as renewable energy and clean tech.”

Driven by strong liquidity and high technology sector growth, SPACs have boomed recently. There were 613 listings around the world totaling $145 billion in 2021, compared to $80 billion for 247 SPACs the year before, according to figures from the consultancy Nasser Saidi & Associates.

These vehicles generally have around two years to find an acquisition target, or face being wound up and returning money to investors.

Being bought by a SPAC can be an easier way for a private company to go public, as disclosure rules are more relaxed.

Yet, SPACs are not without problems. The US Securities and Exchange Commission said last December it was poised to tighten the scrutiny around these firms after launching several investigations into these listings.

SEC chair Gary Gensler said in a speech that, in some SPAC launches, there was “inconsistent and differential disclosure” among the various parties.

“Currently, I believe the investing public may not be getting like protections between traditional IPOs and SPACs.”

The SEC is exploring whether fee structures incentivize bank underwriters on SPAC listings to push ahead with unsuitable deals and then, at a later stage, the same bank may act as an adviser recommending the deal to unsuspecting investors.

The Dubai Financial Services Authority, the market regulator of the DIFC, has issued guidelines for listing SPACs to mitigate some of these risks. As an example, the listing of each investment vehicle will be considered on a case-by-case basis. It will also require it to ring-fence proceeds raised from investors.

Another problem is that, often, SPAC cash can spend a long time looking for a home.

“If you look at the 2021 cycle, 82 percent of 2021 SPACs are still searching for deals and only 3 percent of the SPACs realized their deals,” Saidi added.

SPACs also face a shifting financial environment as central banks tighten global monetary policies to battle inflation.

The fact that regional economies will profit from spiking oil prices does not necessarily mean that this cash will be injected into SPACs, but instead be used to buy into government initial public offerings, Saidi pointed out.

“The process in Gulf Cooperation Council countries will be more institutionalized, given that regulatory frameworks will look at the US example and avoid mistakes that were done there.”

This has not eaten into the regional appetite for SPACs.

Last July, Shuaa Capital said it planned to set up three SPACs, with $200 million in capital. Mubadala Capital unveiled a $200m blank check company IPO last August, which will seek acquisitions in the media and technology sectors, according to Saidi.

Satellite launch company Virgin Orbit, which is also backed by the Abu Dhabi sovereign wealth fund, the Abu Dhabi Investment Authority, agreed to go public through a SPAC deal with the NextGen Acquisition Corp. II, which floated earlier this month with a $3.2 billion valuation.

Also, Saudi Tadawul CEO Khalid Al-Hussan said last December, that the stock exchange was considering whether to allow SPACs to list along with 50 IPOs in its pipeline.

Saidi said: “SPACs’ future remains promising because the region has many young dynamic companies. SPACs will fill the gap, given the under-developed venture capital and private equity sector in the region.”

Decoder

SPAC

A SPAC, also known as a blank check company, is a special purpose acquisition company that goes public despite having no real business. It raises money from investors to buy into another company, but backers may not necessarily know the name of a specifically targeted firm, just general areas the acquisition company is interested in buying into.


Riyadh tops global cities with fastest millionaire population growth

Riyadh tops global cities with fastest millionaire population growth
Updated 06 October 2022

Riyadh tops global cities with fastest millionaire population growth

Riyadh tops global cities with fastest millionaire population growth

RIYADH: Saudi Arabia’s capital Riyadh has recorded the fastest millionaire population growth globally in the first half of 2022, as the Kingdom’s economic growth progresses in line with the goals outlined in Vision 2030, according to London-based investment migration consultancy Henley & Partners. 

According to the report, the number of millionaires grew by 20 percent in Riyadh in the first half.

In the first half, Riyadh created 1,700 new high-net-worth individuals who have assets worth $1 million, while 850 people are multimillionaires with assets worth $10 million.

In the same period, 47 people became centi-millionaires with assets worth $100 million, while five people turned into billionaires.

According to the World Wealth Report 2022 issued by the Capgemini Research Institute for Financial Services in June, Saudi Arabia has the largest number of millionaires in the Middle East with more than 224,000 millionaires living in the Kingdom.

The report also suggested that Saudi Arabia is ranked 17th globally in the number of millionaires, with the number of high-net-worth individuals rising from 210,000 in 2020 to 224,000 in 2021. Sharjah also topped the list with a 20 percent growth, followed by Zambia's Lusaka and Dubai in the second spot, as both cities registered a growth of 18 percent.

Angola’s Luanda and Abu Dhabi secured the third spot, both cities reporting growth of 16 percent, followed by Nigeria’s Lagos at 15 percent and Austin at 14 percent in the fourth and fifth spots respectively.


Biden says he is surveying options after OPEC+ decision to cut output

Biden says he is surveying options after OPEC+ decision to cut output
Updated 06 October 2022

Biden says he is surveying options after OPEC+ decision to cut output

Biden says he is surveying options after OPEC+ decision to cut output

WASHINGTON/NEW YORK: US President Joe Biden expressed disappointment on Thursday over announced plans by OPEC+ nations to cut oil output and said the US was looking at its alternatives.

OPEC+ agreed to steep oil production cuts on Wednesday, curbing supply in an already tight market and raising the possibility of higher gasoline prices right before the US midterm elections in November, when Biden’s Democrats are defending their control of the House of Representatives and the Senate.

“We’re looking at what alternatives we may have,” Biden told reporters at the White House when asked about the OPEC decision. “There’s a lot of alternatives. We haven’t made up our minds yet,” he said.

“But it is a disappointment,” he added of the OPEC+ decision, and indicates problems.

Prices

Oil prices held at three-week highs on Thursday after OPEC+ decision. Brent crude futures gained 88 cents, or 0.9 percent, to $94.25 per barrel by 11:19 a.m. EDT (1519 GMT) after settling 1.7 percent up in the previous session. US West Texas Intermediate crude futures rose 79 cents, or 0.9 percent, to $88.55 after closing 1.4 percent up on Wednesday.

Separately on Wednesday, Russian Deputy Prime Minister Alexander Novak said Russia could cut oil output in an attempt to offset the effects of price caps imposed by the West over Moscow’s actions in Ukraine. 

A draw in US oil stockpiles last week also supported prices. Crude inventories dropped by 1.4 million barrels to 429.2 million barrels in the week ended Sept. 30, the Energy Information Administration said.


Saudi Arabia’s point-of-sale value rises to $3.4bn as food spending increases: SAMA

Saudi Arabia’s point-of-sale value rises to $3.4bn as food spending increases: SAMA
Updated 06 October 2022

Saudi Arabia’s point-of-sale value rises to $3.4bn as food spending increases: SAMA

Saudi Arabia’s point-of-sale value rises to $3.4bn as food spending increases: SAMA

CAIRO: Food and drink sales helped drive a 23 percent rise in point-of-sale transactions in Saudi Arabia in the week ending Oct. 1, the latest weekly data from the Saudi Central Bank revealed.

Sales grew by SR2.4 billion ($640 billion) last week to reach SR12.8 billion in what was the highest percentage rise since the week ending July 30.

POS is an economic term used to describe what is spent by consumers using their ATMs and credit cards in retail stores, shopping malls, and pharmacies, among others. 

This five-week peak fell just below SR13.5 billion worth of POS transactions recorded in the week ending on Sept. 3, showed the SAMA data. 

This spike was mainly driven by increased spending on food and beverage services, with the sector’s total POS transaction rising by SR681.3 million to reach SR2.1 billion in the week ending on Oct. 1, recording 47.9 percent growth over the previous week.

Of the 17 sectors, 16 saw a rise in the value of POS transactions:

  • Other — Up SR382.3 million; up SR1.2 million previous week
  • Miscellaneous goods and services — Up SR342.9 million; down SR4.9 million last week
  • Health — Up SR219.6 million; down SR7.6 million previous week 
  • Transportation — Up SR164.3 million; down SR30.7 million previous week 
  • Gas stations — Up SR102.3 million; down SR26.1 million last week 

The education sector witnessed the biggest percentage change in the week ending on Oct. 1 in both transaction value and number of transactions. 

The sector’s POS transaction value went up by 115.6 percent to reach SR184 million, while the number of POS transactions went up by 51.9 percent to hit 170,000. 

The only sector that recorded less POS transactions – both in number and value – in that week was the hotels. 

This sector’s POS value dropped by SR23.2 million to reach SR215.9 million, while the number of transactions dropped by 42,000 to reach 562,000 transactions. 

With regards to the number of POS transactions, food and beverages also led the way with an increase of 4.4 million transactions in that week to reach 37.2 million transactions. 

  • Restaurants and cafes — Up 3.7 million; down 0.5 million previous week
  • Miscellaneous goods and services — Up 2.9 million; down 0.9 million previous week
  • Other— Up 2.6 million; down 0.4 million previous week
  • Health — Up 1.6 million; down 0.5 million previous week
  • Gas stations — Up 1 million; down 0.4 million previous week

The city of Riyadh, which records the largest share of POS transactions, saw a 11.4 percent increase in the number of transactions in the week ending Oct. 1, compared to a 3.1 percent fall the week prior. 

The city witnessed a 20.2 percent rise in POS transaction value in the week ending Oct. 1, compared to only 0.3 percent the previous week. 

The Kingdom’s capital recorded a total POS value of SR4 billion, up by SR1 billion from the week before. 

As for the number of POS transactions in Riyadh, it rose by 7.7 million from the previous week, reaching 57.6 million in the week ending on Oct. 1. 

Jeddah followed with SR1.9 billion worth of POS transitions which increased by SR253.8 million in the week ending on Oct. 1.

The number of transactions in the city reached 21.9 million, up 1 million from the week before. 


Saudi GAC approves Al Hilal’s acquisition of Etihadat Abyan assets 

Saudi GAC approves Al Hilal’s acquisition of Etihadat Abyan assets 
Updated 06 October 2022

Saudi GAC approves Al Hilal’s acquisition of Etihadat Abyan assets 

Saudi GAC approves Al Hilal’s acquisition of Etihadat Abyan assets 

RIYADH: Saudi pharmaceutical firm Al Hilal Trading Co. has received the General Authority for Competition’s approval to acquire the assets of Etihadat Abyan Co..

Under the formal approval by the regulator, the acquired assets by Al Hilal Trading Co. include S Team and Mawj Al Hilal brands and the related four stores.

The deal will not significantly affect the sportswear market in the Kingdom, GAC said in a statement according to Argaam on Oct. 6. 

The intended acquisition will be done by transferring the assets to Al Hilal Trading Co., a subsidiary of Al Hilal Club Investment Co.. 

Last August, the Tadawul-listed online food delivery platform Jahez International Co for Information Systems Technology, partnered with Al Hilal Investment to set up an online marketing and sales firm.


MENA total startup funding drops 54% month-on-month: Wamda 

MENA total startup funding drops 54% month-on-month: Wamda 
Updated 06 October 2022

MENA total startup funding drops 54% month-on-month: Wamda 

MENA total startup funding drops 54% month-on-month: Wamda 

RIYADH: Startups in the Middle East and North Africa region raised $173 million across 51 deals in September, marking a 54 percent decrease compared to the month before. 

Saudi Arabia’s logistics startup TruKKer was responsible for the bulk of that funding as it secured a $100 million pre-initial public offering round, according to Wamda.

The Kingdom raised a total of $114 million in startup funding in just six deals, while the UAE had 12 deals with a total of $27 million. 

Aside from Trukker’s fundraise, fintech companies managed to get the highest amount of funding with $28 million followed by food tech startups with $22 million. 

Foreign investment was high in September as US investors participated in 11 deals while UK investors were the second active with seven deals.