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Record number of investors apply for Emaar Economic City IPO

RIYADH - Developer Emaar Economic City’s $680 million initial public offering was 163 per cent oversubscribed and broke the Saudi record for the number of investors applying for shares, preliminary figures showed.

The IPO, which closed on Wednesday, was watched around the Gulf Arab region as a gauge of sentiment after a stock market crash earlier this year, especially in Dubai, the home market of major shareholder Emaar Properties

More than 9.2 million Saudis — over half the kingdom’s citizens — applied for shares with bids totalling 6.7 billion Saudi riyals, ($1.79 billion) the company said. Emaar Economic City was offering a 30 per cent stake, or 255 million existing shares at 10 riyals ($2.67).

An official at financial adviser HSBC said final figures could show an oversubscription rate of up to 200 per cent and that 10 million investors applied for shares.

The previous record was set when 8.8 million Saudis applied for shares in Albilad bank’s $400 million IPO last year.

‘For us it’s an astounding success that shows that liquidity has not been affected by the correction,‘ said Ioannis Karapatkis of HSBC Saudi Arabia’s Global Investment Banking Advisory.

The IPO is the first since a crash halved the value of the Arab world’s biggest bourse between February and May and analysts agreed it was a success even by the standards of the Gulf, where heavy oversubscription rates were routine during equity boom of the past few years.

‘It highlights that interest is very high for primary markets, that real estate development has strong potential in Saudi Arabia...,‘ said Walid Shihabi of Dubai investment bank Shuaa Capital.

Emaar Economic City is developing King Abdullah Economic City, a $26.7 billion industrial and financial centre on Saudi Arabia’s Red Sea coast — the single largest private investment ever made in the world’s top oil exporter.

The attraction of an IPO for most Saudi retail investors lies in the virtual certainty of a quick profit when the shares debut. Gulf governments insist on conservative valuations for IPOs, and the offer price is determined by regulation rather than a process of book-building.

‘Since the oversubscription is close to our estimate, we expect the stock to jump to 40-50 riyals,‘ said Shakeel Sarwar of Bahrain-based investment bank SICO.

He said that would put the stock in line with the rest of the Saudi market which is trading at around 6 times book value.

Shares in Saudi petrochemical firm Yansab surged by up to 1,200 per cent when trading began in February after $520 million IPO that was two times oversubscribed.

The stock now trades 270 per cent above its listing price.

Saudi British Bank was the IPO’s lead manager.