The retail tranche of the SR1.88bn (US$501m) IPO of Saudi Arabia’s Specialized Medical Company was only 1.45 times subscribed despite demand in the institutional tranche reaching US$32.4bn.

The retail tranche represents 20% of the IPO with 15m shares on offer at SR25 each. That is larger than the 10% often earmarked for retail investors but SR542.2m of orders is well short of demand seen on other Saudi IPOs in which retail demand is typically enough to cover the entire deal and regularly tops SR1bn.

In March, the 10% retail tranche of the SR450m IPO of poultry producer Arabian Company for Agricultural and Industrial Investment, known as Entaj, was more than 30 times covered with demand of SR1.4bn. The same month, Umm Al Qura for Development and Construction had orders reaching SR3.93bn for the 10% retail tranche of its SR1.96bn float, more than twice the entire deal.

More recent deals have increased the retail allocation though demand seems to have cooled. The 20% retail tranche on United Carton Industries' SR600m IPO in May was 8.9 times covered with demand of just over SR1bn, while institutional demand exceeded SR75bn.

Earlier this month, low-cost carrier Flynas said it was 3.5 times covered on the 20% retail tranche of its SR4.1bn IPO, representing demand of SR2.87bn and the first in which retail wasn't enough to cover the whole deal. Institutions put in orders for 100 times the whole deal.

Cooling demand from retail is only rational given only Umm Al Qura has delivered positive returns, closing on Thursday at SR22.72, 51.5% above pricing.

Entaj is 21% below pricing and United Carton is down 31.7%. Flynas shares debuted on Wednesday and ended 3.4% down and on Thursday were still 3.25% below IPO pricing.

A trading date for SMC shares is yet to be set, with final allocations and refunds of excess subscriptions due by Tuesday.

EFG Hermes and SNB Capital ran the IPO.

Source: IFR