Saudi Arabia is set to make about $5bn in dividends over the next three months as an outcome of its plans to sell off stakes in local companies held by The Public Investment Fund (PIF). The Public Investment Fund is Saudi’s sovereign wealth fund.
In December 2021, Saudi Arabia had raised $3.2bn by selling its shares in Saudi Telecom Co., the most extensive secondary offering in Europe, the Middle East, and Africa region last year. In the same month, they also raised $1bn from selling a share in the Saudi Exchange. Along with this, PIF is set to raise $820m from selling stakes in Elm Co., a digital security firm, after pricing the share sale at the upper end of the pricing range. Extending its 2021 gains of 30%, the Saudi benchmark index has already jumped about 9% this year.
Saudi has revealed its plans to invest about $40bn into the local economy this year as part of Crown Prince Mohammed bin Salman’s efforts to invest in entertainment and tourism to diversify the economy away from oil. The proceeds from the share sales will offer a welcome boost to these plans. Also, marking a shift in the strategy of the Public Investment Fund, the sales will help the company recycle its capital, sell existing shares and invest in new firms.
Saudi Arabia has been experiencing huge investor demands, with IPOs generally being priced on top of their offering ranges as well as surging on their trading debuts. According to Goldman Sachs Group, Saudi Arabia will remain the busiest of the Middle East’s stock markets.
Calling 2021 a “standout year” for the Arabian Gulf, John Wilkinson, head of emerging-market equity capital markets at Goldman Sachs, commented, “Most of the marquee offerings have posted strong post-IPO performances, sparking further interest from international investors.” Since hiring Eyas Aldossari as the head of investment banking in 2017, Goldman has fast built its Saudi presence, helping it catch up with competitors like HSBC Holdings Plc and JPMorgan, who have stronger ties with the Kingdom.
IPOs by Saudi Tadawul Group Holding Co., ACWA power and Solutions by STC, and several others in Abu Dhabi have helped push the MENA region’s equity issuance to about $23 billion. Although Saudi remains “the biggest driver for Middle East ECM”, Wilkinson commented that with Abu Dhabi Inc. becoming more active and the Dubai government’s efforts “will drive bigger volumes from the UAE going forward.”