Saudi Arabia: Families Float Like Sovereigns

A growing number of local family-owned businesses are floating shares alongside major state assets.

Saudi Arabia’s stock market witnessed a record year. In 2021, the kingdom topped all MENA IPO activity with 15 listings drawing in a total of $4.65 billion from investors looking to secure a front row seat as the country transitions away from oil.

“The Saudi market has been by far the most vibrant market in the last two years in the region,” says Alissa Kole, managing director at Govern Economic and Corporate governance center.

The largest operation was renewable-energy firm AWCA Power International, which attracted $1.2 billion in September, followed by Riyadh’s exchange itself–the Tadawul–which floated 10% of its shares to private investors in December. The sale marked a “significant milestone” in the country’s transformation, Saudi Tadawul Group CEO Khalid Al-Hussan told CNBC at the time.

For the past few years, the authorities have been encouraging the development of the local stock market to promote competition and boost foreign investment. The Tadawul opened to foreigners in 2015 and was then complemented in 2017 by Nomu, a secondary-listing tier with easier requirements. In 2019, the Capital Market Authority (CMA) lifted restriction on foreign ownership of listed companies, allowing non-Saudis to acquire majority shares in key sectors of the economy.

Now, a growing number of local family-owned businesses are floating shares alongside major state assets, possibly creating a new governance dynamic. “The advantage is being able to raise capital in the market, being able to grow the company, profile, prestige,” says Kole. “But in the past that argument hasn’t generally worked for many of the family-owned companies in the region because the founders were reluctant to give up control and subject their companies to ‘disinfecting sunlight.’”

Although new regulatory requirements will be in order, local businesspeople also see an opportunity to solve family disputes and overcome the challenge of keeping the ownership solely within the family generation after generation. The Tadawul has already received 50 IPO applications for 2022.