Jeddah, Asharq Al-Awsat- 40 non-listed Stock Corporations have announced going public. Dr. Said A. Al Shaikh, Chief Economist at the National Commercial Bank (NCB) stated that 36 companies have specifically revealed the amount of capital that would be required from the market and indicated the names of lead arrangers and consultants that were appointed for the purpose of the initial public offering (IPO).
Dr. Al Shaikh estimated the total capital sought by all the 40 announced companies in the range of SR 30 to SR 35 Billion. He added that the cluster of joint stock companies, which supposedly have already qualified for the first legal requirement by the Capital Market Authority (CMA) consists of 325 companies by the end of 2005. This in on top of the 77 companies currently listed in the Saudi Stock market.
He explained that the strong oil prices and liquidity growth as banks are expanding their loans’ portfolios to the private sector, all have strengthened corporate profitability, and accordingly continue to push stocks prices upward.
Dr. Al Shaikh added that the potential of the market seems limitless if the massive magnitude of oversubscription to companies floated in the last tow years is taken into consideration. The amount of subscribed funds for those floatations was ten times the capital sought by these companies going public.
He also mentioned that the fast growth of newly established companies in the kingdom resulted in a noticeable increase in the number of companies. He indicated that the number of active establishments in the kingdom rose from 372,000 in 1995 to 585,000 in 2004, at a rate of 5.2% in annual growth. Dr. Al Shaikh added that this growth average still continues. The expected total number of active companies will reach around 615,000 by the end of 2005.
Of those 585,000 active commercial establishments, around 88,000 establishments use no less than 20 workers. Regarding the legal structure of those 88,000 establishments, he indicated that the largest cluster of these lies in family businesses whose legal status is “sole proprietorship”. This group makes up 92% of those no less than 20 workers. Numerous companies can be picked up from the cluster of “sole proprietorship” as potential candidates for IPO.
Chief Economist of the NCB stated that the more lucrative candidate for IPO is the second largest cluster “limited Liability Partnership’ comprising nearly 5100 active businesses and many of them have employment size in excess of 500 workers. The third largest cluster is “Partnerships” which make up around 1.4% of the selected total, followed by the cluster of “Limited Partnership” comprising 0.6%.