Whatâs Going On Here?Tadawul â Saudi Arabiaâs stock exchange operator â is planning to list on the stock market next month, in a move thatâs been on the cards for a long time⊠What Does This Mean?Tadawul was reportedly first thinking about listing its shares on⊠well, itself back in 2016, but the company paused the plan to focus on more pressing matters: encouraging foreign investors to trade on its platform, and hosting the biggest-ever initial public offering (IPO) for oil giant Saudi Aramco.
The company mightâve been right to wait. For one thing, the number of trades on its exchange is now at record highs, boosting both its bottom line and investor optimism. And for another, the company should fetch a good price for its shares given how high valuations are right now. Tadawul, then, has said itâll sell a 30% stake in its business on the stock market next month â a move that could see it raise up to $1 billion. Why Should I Care?The bigger picture: Oil country problems.
There is one big risk to Tadawul, mind you. See, OPEC+ â a group of the worldâs biggest oil-producing countries â looks like itâll resist calls to boost oil production in December, which might encourage Japan, China, and the US to release some of their own stockpiles. That extra supply would drive down prices, which would dent Saudi Arabiaâs heavily oil-dependent stock market. And if investors start steering clear of the countryâs stocks, Tadawulâs profits â and its eventual IPO valuation â could take a hit.
Zooming out: IPOs might run out of steam.
Itâs been a record year for IPOs, with companies raising over $600 billion already this year. A lot of thatâs to do with government and central bank support thatâs helped keep investors flush with cash. But that support is starting to dwindle, and some analysts are warning that the shift could cause stock valuations to drop off â and take the IPO boom along with them. | 