Interest in Saudi Arabian ECM is growing in 2024, with a host of IPOs and listed follow-on opportunities being eyed by investors.

Last week, investors swooped in on the IPO of Saudi Arabia’s Modern Mills for Food Products Co., with the books covered within hours.

The milling and nutrition company is conducting an IPO with a range set between SAR 44 and SAR 48 (USD 12.8) per share; the final pricing will be announced on 27 February. This implies a total offering size between SAR 1.08bn (USD 288m) and SAR 1.18bn (USD 314m), and a market capitalisation at a listing of between SAR 3.6bn (USD 960m) and SAR 3.9bn (USD 1.04bn).

Late in January, Saudi-based Middle East Pharmaceutical Industries Company, known as Avalon Pharma, priced an IPO at the top of its range. The company announced it would raise SAR 492m (USD 131.2m) and secure a market capitalisation of SAR 1.64bn (USD 437.33m) at listing.

“The local market is still incredibly active,” said one ECM lawyer with a practice in the wider Gulf region. “There is a decent, healthy pipeline of deals,” he added.

In 2023, IPOs closed with a respectable USD 3bn from eight deals, down from USD 10.2bn in 2022 from 20 deals, according to Dealogic data.

The performance was in line with 2020 and 2021, when it reached USD 2.6bn and USD 4.5bn. Meanwhile, follow-ons are slightly down from previous years; 2023 closed with USD 1.3bn from nine deals, while volumes in 2021 and 2022 were consistently above USD 4bn.

There are hopes that momentum will continue in 2024. Saudi Arabian online cosmetics retailer Nice One is reportedly planning an initial public offering, as well as Almoosa Health Group, a local healthcare provider, and Malaz Capital-backed Ram Medical Clinics, which specialises in dentistry and dermatology.

Alongside a healthy pipe of private sector issuers, some large state sell-downs are also expected to boost the IPO pipe. Saudi Global Ports Co., which is owned by the kingdom’s sovereign wealth fund PIF and Singapore’s PSA International Pte, is considering an initial public offering in Riyadh, according to a report.

Jumbo follow-ons could satisfy a market hungry for more. Saudi Arabia was reported to be set to hire banks for a long-awaited secondary share sale in Aramco [Tadawul:2222], a deal that could generate around USD 20bn.

“There is more excitement than anxiety about what’s next,” the lawyer said.

Geopolitical instability has not impacted listings yet, but the effects are starting to ripple. The lawyer said he was working on the 2H24 IPO of a Saudi company that has been impacted by the Houthi attacks in the Red Sea. Operational costs have gone up as major transport hubs face a delicate situation, potentially hurting certain company’s equity stories in the medium term.

“If suddenly investors do not take meetings, or the situation becomes worse, or spreads wider, that is when we would feel the impact,” he said.