Saudi Arabia's IPO pipeline runs hot, Jamjoom Pharmaceuticals covered on first day
Jamjoom Pharmaceuticals ropes in SEDCO and Al Faisaliah as cornerstone investors
The Riyadh initial public offering of generic drugmaker Jamjoom Pharmaceuticals Factory Co. got enough orders for all shares on offer within the first day of opening its books, a positive sign for what's set to be the biggest listing in Saudi Arabia so far this year.
The owners of Jamjoom Pharma are seeking to raise as much as 1.26 billion riyals ($336 million) in the IPO, with the price range for 21 million shares set at 56 riyals to 60 riyals apiece, according to a statement on Monday.
The order books for the IPO are covered throughout the price range and demand exceeds the full deal size, according to terms seen by Bloomberg.
Jamjoom Pharma's IPO will be the largest in the kingdom since Saudi Aramco Base Oil Co.'s $1.3 billion listing in December and will serve as a test of investor appetite for share sales. Its IPO market has been subdued so far this year, with just $72 million raised in the slowest start since 2014, a far cry from the $4 billion seen by this point last year, data compiled by Bloomberg show.
Weaker oil prices on concerns that slower global economic growth might hurt demand have weighed on Saudi stocks, which dropped sharply over the past year. However they have posted a 14 per cent rebound since a March low after OPEC+ announced a surprise oil production cut at the start of April.
Saudi Economic & Development Holding Co. and Al Faisaliah Group have agreed to subscribe for 24.6 per cent of Jamjoom Pharma's offering as cornerstone investors. The price range implies a valuation of as much as 4.2 billion riyals for the company.
Morabaha Marina Financing, a non-bank finance institution, has also pushed ahead with bookbuilding for its Saudi IPO in which it's seeking to raise as much as $83 million.
Still, other potential issues are proceeding cautiously. ADES International Holding, an oil and gas driller backed by the kingdom's wealth fund, has pushed back its IPO to the second half of the year as it waits for the right window, while preparatory work has significantly slowed down for the IPO of Aramco's energy-trading business, Bloomberg News reported.
Bookbuilding for institutional investors in Jamjoom Pharma's IPO will run from May 15 to May 22, while the retail offering will take place from May 30 to June 1.
JPMorgan Chase & Co. and Saudi Fransi Capital are financial advisers, bookrunners and underwriters while Al Rajhi Capital is also an underwriter.
Tadawul is the best performing market this year with a return of more than 8%. However, the performance has been volatile since the start of the year and most of the gains came since the second-half of March
How much will retail investors get?
A maximum of 2.1 million shares - representing 10 per cent - of the offer will be allocated to individual investors. In the event this target is not met, the lead manager may reduce the number of offer shares to individual investors in proportion to the number subscribed.
"We believe Saudi Arabia will continue to be the biggest IPO market this year as well," said Junaid Ansari, Director of Investment Strategy and Research at Kamco Invest. "The bulk of the deals are expected to be back-end loaded (in the year).
"Tadawul has already seen 14 listings so far this year."
With inputs from Bloomberg