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.


Saudi Innovest makes $8m in profits as it exits Misk Tarout 

Saudi Innovest makes $8m in profits as it exits Misk Tarout 
Updated 13 sec ago

Saudi Innovest makes $8m in profits as it exits Misk Tarout 

Saudi Innovest makes $8m in profits as it exits Misk Tarout 

RIYADH: Saudi Arabia’s Innovest Properties has exited Misk Tarout after having pulled in SR30 million ($8 million) in the last three months.

The Alkhobar-based real estate firm confirmed its profit from the exit process will be calculated in the company’s financial statements for the second quarter of 2022, according to a statement. 

The exit will also enhance its direction in implementing targeted profitability and growth plans, CEO Essam Bukhamseen said. 


MENA Project Tracker —  Edamah requests bids on newest project; KAPP starts bids on IWPP projects 

MENA Project Tracker —  Edamah requests bids on newest project; KAPP starts bids on IWPP projects 
Updated 04 July 2022

MENA Project Tracker —  Edamah requests bids on newest project; KAPP starts bids on IWPP projects 

MENA Project Tracker —  Edamah requests bids on newest project; KAPP starts bids on IWPP projects 

RIYADH: Bahrain Real Estate Investments, known as Edamah has begun its hunt for bids for the 20,717 square meter plot investment project at Hidd within Muharraq governorate in Bahrain.

The development is located alongside Diyar Al Muharraq and Dilmunia waterfronts, near the Khalifa town housing project.

The leading property developer has held Bahrain’s sovereign wealth fund since its establishment in 2006, reported Trade Arabia.

It is also on the search for bids on a similar investment project development — which includes six more plots with a total area of 5,618 square meter at Askar within Southern governorate.

KAPP starts bids on water and power generation

Kuwait Authority for Partnership Projects, known as KAPP, has requested bids to develop Al-Zour North 2 and 3 and Al-Khiran 1 as part of the independent water and power producer projects.

The two plots are expected to generate a net capacity of 4,500 MW of power and 290 million imperial gallons a day of water, reported MEED.

This decision comes amid increased power demand in Kuwait — soaring to a record high of 15.67 Gigawatt last July.

The deadline for submitting project bids is on Aug. 16.


Saudi airline Flynas to operate AlUla-Cairo direct flights from October

Saudi airline Flynas to operate AlUla-Cairo direct flights from October
Updated 04 July 2022

Saudi airline Flynas to operate AlUla-Cairo direct flights from October

Saudi airline Flynas to operate AlUla-Cairo direct flights from October

RIYADH: Saudi Arabia’s budget airline Flynas announced the launch of its first direct flights between its heritage city AlUla and Cairo, starting from 6th October, according to the Saudi Press Agency. 

The airline will operate two direct flights per week, on Saturdays and Thursdays, between AlUla International Airport to Cairo International Airport.

Located in the north-west of Saudi Arabia, AlUla is one of the key tourist destinations that offers a variety of experiences in heritage, art, culture, recreation and adventure.


Saudi Aramco becomes first-ever MENA firm in Clarivate’s top 100 global innovators list

Saudi Aramco becomes first-ever MENA firm in Clarivate’s top 100 global innovators list
Updated 04 July 2022

Saudi Aramco becomes first-ever MENA firm in Clarivate’s top 100 global innovators list

Saudi Aramco becomes first-ever MENA firm in Clarivate’s top 100 global innovators list

RIYADH: Saudi Aramco has been named one of the top 100 global innovators by American analytics company Clarivate. 

In its report titled “Top 100 Global Innovators 2022,” Clarivate revealed that Saudi Aramco is the first-ever company from the Middle East and North Africa region to be placed in the list. 

“The regional diversity continues to increase, with the first-ever Middle Eastern list entry via energy firm Saudi Aramco,” wrote Clarivate in the report. 

Apart from Saudi Aramco, other new entrants to the list are China’s Alibaba, Germany’s Continental, US’ General Motors, South Korea’s Hyundai Motors and Kia Motors, US’s Philip Morris International, and UK’s Rolls-Royce. 

Clarivate added that companies have been included in the list based on factors like influence, success, globalization, and technical distinctiveness. 


TASI extends losses on fears of economic slowdowns: Closing bell

TASI extends losses on fears of economic slowdowns: Closing bell
Updated 04 July 2022

TASI extends losses on fears of economic slowdowns: Closing bell

TASI extends losses on fears of economic slowdowns: Closing bell

RIYADH: Saudi stock markets extended losses as investors worried that the latest central bank efforts to curb inflation would lead to rapid economic slowdowns.

The main index, TASI, fell 0.93 percent to reach 11,358, while the parallel market, Nomu, dropped 1.94 percent at 20,672.

Fawaz Abdulaziz Alhokair Co. led the decliners since the market opened with a 9.99 percent fall, followed by Abdulmohsen Alhokair Group for Tourism and Development which fell 9.92 percent.

Saudi Aramco, the largest player on the Saudi oil market, lost 1.29 percent, while Methanol Chemicals Co. fell 2.57 percent.

In the financial sector, the Kingdom’s largest valued bank Al Rajhi, dropped 0.50 percent, while The Saudi National Bank slipped 1.05 percent.

Among the biggest IT companies, Elm Co. gained 0.56 percent and Al Moammar Information Systems Co. edged down 2.08 percent.

Jadwa REIT Saudi Fund led the gainers with 4.75 percent gain, closely followed by Dar Alarkan Real Estate Development Co. with a 4.56 percent rise.

In the energy sector, West Texas Intermediate crude was trading at $109.69 per barrel and Brent crude was trading at $113.12 per barrel as of 3:24 p.m. Saudi time.