Saudi mall operator Arabian Centres falls below IPO price in first trading

Shares in Saudi Arabian mall operator Arabian Centres Co fell below their initial public offer price on Wednesday, after opening slightly higher.

At 0736 GMT, shares were trading at SAR24.34 ($6.49) against an IPO price of SAR26, which valued the deal at SAR2.8bn including the greenshoe option.

The shares hit SAR26.10 in opening trade.

Arabian Centres’ share sale was the kingdom’s third biggest since Saudi lender National Commercial Bank raised $6bn in 2014, according to Refintiv data.

Riyadh has been encouraging more family-owned companies to list in a bid to deepen its capital markets as part of reforms aimed at reducing its reliance on oil revenue.

“The fall today is not surprising given the tepid response to the offering and many institutional investors who might have been over allocated must be offloading their position today,” said Nishit Lakhotia, head of research at Bahrain-based SICO.

The IPO was priced at the lower end of an indicative price band and came at a time when global markets were tumbling amid a trade dispute between the United States and China.

The company said in a statement 94 per cent of the offering went to institutional investors and 6 per cent to individuals.

The company’s listing comes after new rules introduced by Saudi Arabia’s market watchdog, the Capital Markets Authority, which aim to limit stock fluctuations after a public share-sale.

Goldman Sachs was appointed as a stabilising agent, a role in which the bank oversees Arabian Centres’ stock in the early hours of trading.

The IPO of Arabian Centres, majority-owned by Fawaz Alhokair Group, is the first in the kingdom under Rule 144a, which allows the sale of securities primarily to qualified institutional buyers in the United States.

Saudi Arabia’s Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, has indirectly invested in the $747m initial public offering, sources familiar with the matter told Reuters earlier this month.

The Saudi stock market is up over 10 per cent so far this year, one of the best performing in the Middle East, as it entered global emerging market benchmarks such as the FTSE Russell emerging market index.

Arabian Centres owns 19 malls and plans to expand its operations to 27 malls within four years. It is constructing cinemas after a decades-long ban on movie theatres was lifted last year.