Dour debuts, combined with a slump in Saudi Arabia’s stocks and two pulled listings on the parallel exchange, threaten to take the sheen off a market that has been among the world’s hottest for new share sales in recent years.
Al Khaldi Logistics Co. and Dome International Investment Co. canceled their planned share sales on the parallel market — Nomu — on Tuesday, without specifying a reason. That came just days after a muted trading debut for United Carton Industries Co., which has since lost nearly a fifth of its value following its initial public offering.
Saudi stocks ended May as the worst performers globally, pressured by falling oil prices and concerns about slower spending on mega-projects. Still, companies raised more than $1.3 billion from new share sales during the month.
The parallel market has been particularly active, with 10 deals since April — up from four during the same period last year. But secondary performance hasn’t kept pace. The Nomu Parallel Market Capped Index is down over 13% year-to-date, underperforming the benchmark Tadawul All Share Index, which has fallen about 9%.
Seen as a fertile testing ground for smaller, high-growth firms eying eventual progression to the main exchange, the Nomu may be falling victim to its own success.
“The recent success of Nomu listings and transitions to the main market may have led promoters to chase valuations out of sync with current sentiment,” said Nishit Lakhotia, head of research at SICO Bank. “Appetite for IPOs at any valuation is no longer there.”
Low-cost carrier Flynas Co.’s trading debut, expected in the coming weeks, will be the next big test. The largest Middle Eastern IPO so far this year attracted over $100 billion in orders.
Airlines remain a niche play in the region, with just two publicly listed carriers. Based on their performance this year — Jazeera Airways Co. is up 58% and Air Arabia PJSC 17% — Junaid Ansari, director of investment strategy at Kamco Invest, expects Flynas to make a strong debut.
“That said, global and regional markets have remained extremely volatile and fragile, and sensitive to the ever-changing news related to tariffs,” he said.
Saudi companies looking to launch listings - Ejada Systems Ltd., Dar Al Majed Real Estate Co., Marketing Home Group Co. and Sports Club Co. — all have regulatory approval to go public on the main market, and may have to be cautious with valuations.
“There could be some delays naturally and valuations can become more palatable,” Lakhotia said. “But I do expect the market to become active after summer given the strong pipeline.”
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