JEDDAH, 23 February 2005 — Demand for shares in Saudi Arabia’s newly established Bank Albilad is so huge that scuffles are breaking out at banks, and stock subscription forms are being sold on the black market, traders say.
Thousands of people rushed to buy Bank Albilad shares from early morning on Monday - the first day of the opening of the initial public offering (IPO).
Bank employees from different banks in the south said they encountered problems, as people overcrowded and pushed each other in front of the bank entrance. There was traffic jam created in front of every bank branch. There were complaints of black market in the sale of stock applications. Al-Rajhi Banking & Investment Corp. complained of the lack of discipline. Some people alleged that applications were sold for SR200 each. “Influence played an important role,” Mushabab Al-Matouq, a stock buyer, said. Favored customers in the bank were getting a lot of help from employees and they were giving full guidance and help. Another man said he visited a bank and by the time he reached the entrance it was time for the bank to close for the morning session.
Subscription to the IPO of Albilad exceeded SR950 million ($253.3 million) — almost two thirds of the IPO - in the first day of trading, newspapers reported yesterday.
Total subscription reached SR950 million in Monday morning’s session, while it was expected to have exceeded SR1 billion in the following evening session, the Al-Eqtissadiah newspaper said.
Thirty million shares priced at SR50 ($13.3) per share — a total of SR1.5 billion ($400 million) — representing 50 percent of Albilad’s capital, are on offer, the Al-Jazirah daily said.
A minimum limit of subscription was set at 10 shares per investor, reaching a ceiling of 5,000 shares per subscriber, Al-Jazirah added.
In the Eastern Province, people lined up in front of banks several hours before it opened hoping to get stock applications. There were cases of people involved in fights with the bank staff that made the security men step in to prevent any further escalation.
In Riyadh, the hall of Riyadh courts was full of women trying to assign legal agents and relatives to buy stocks for them.
In Makkah, hundreds of people lined up in front of banks trying to get applications for stocks.
Similar problems were encountered during the recent IPO of Ettihad Etisalat.
In Taif, people came early to banks to fill the applications. People visited the bank’s branches despite their campaign and promotion that stocks could be sold through bank phone lines or Internet site. They overcrowded the entrances of these banks before they opened.
The Arab National bank was similarly overcrowded with fights breaking out inside the premises. In one of the fights, more than 100 applications were destroyed. The bank employee gave a box of 100 applications to another employee to distribute it outside the bank. In a strange scene, people attacked the man who had application forms. In the bargain all applications were damaged.
In some banks, managers of branches had to close down their branches and prevent them from getting inside.
At the same time, many government departments complained of the absence of many employees, as they were presumably busy buying stocks at Bank Albilad. At a branch of the National Commercial Bank, some overzealous men attacked an employee who had application forms. The man, with a broken arm, was taken to hospital.
Albilad was established in November 2004 from the merger of a number of local foreign exchange companies. The new bank applies Shariah in its dealings.
The National Company for Cooperative Insurance (NCCI) was the last company to precede Albilad in offering partnership to the public. Its IPO of SR1.435 billion ($382 million) in January was oversubscribed 11.5 times.
