JEDDAH -- The initial public offering (IPO) of Ettihad Etisalat, the new Saudi mobile phone company, was oversubscribed 51 times, reaching a whooping SR51 billion ($13.6 billion), it was announced here yesterday.
"This is the biggest IPO in the history of the Saudi stock market," said Issa Al-Issa, chief executive of Samba Financial Group, in a statement.
Twenty million shares were on offer at SR50 ($13.3) each, totaling SR1 billion ($266.6 million). But the number of applicants reached a staggering 4.28 million, he said.
Issa said that the surplus in subscription would be returned through banks on Nov. 4. A limit of 10,000 shares per person was set to allow room for small investors, in the first move of its kind in a public offering in the Kingdom.
The minimum per person was set at 10 shares, and the offering was limited to Saudi individuals.
The Cabinet in August awarded Etisalat Consortium the license in the Kingdom's lucrative market after the UAE telecom giant Etisalat made the highest bid of SR12.21 billion ($3.25 billion). Twenty percent of the company that will operate the 25-year license must be sold off to the public, and a public offering for another 20 percent is required in the third year of operation.
Fayyaz Siddiqui, the consortium's chief financial officer, said 4.28 million investors -- around a quarter of Saudi population -- applied for the shares during the IPO that closed on Oct. 25.
Investors will receive just four or 4.6 shares each because of the strong demand, which is likely to encourage Saudi officials planning two more major IPOs before the end of the year.
Demand for shares in the new Saudi mobile company was so great that scuffles broke out last week at banks, and newspapers reported subscription forms were being sold on the black market. Samba, which organized the share issue, and two other banks kept branches open nationwide through Saudi Arabia's Thursday-Friday weekend to try to meet demand.
Traders attributed the buying frenzy to the strong performance of the Saudi bourse over the last 18 months, underpinned by record oil prices, healthy corporate results and a surge of investor liquidity.
Most expect the 50-riyal Ettihad shares to soar in value. "Expectations are that they will reach SR200 in the short term. I think they will be trading at SR300 in one month," said Abdulwahab Abu Dahesh, a senior economist at Riyad Bank.
Investors have also been encouraged by recent government steps to implement investment reforms, such as establishing a board for the capital market authority to enact a long-awaited capital market law.
Two other major share offerings are planned for November and December. State-owned insurance company NCCI is due to be privatized and the newly formed Al-Bilad Bank plans an estimated SR1.5 billion share flotation.
Etisalat Consortium says it also intends to raise its capital by 40 percent to SR7 billion. Founding shareholders have already allocated SR1.6 billion and the remaining SR400 million will be raised through a rights issue, it says.
Etisalat's move into Saudi Arabia ends the monopoly of majority state-owned Saudi Telecom Company, the Kingdom's second-largest listed company and one of the most heavily traded on the bourse. STC remains for now the only landline operator in the Kingdom.
-- Additional input from agencies
Khalil Hanware
© Arab News 2004
