What’s going on?
Tadawul – Saudi Arabia’s stock exchange operator – is planning to list on the stock market next month, in a move that’s 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 might’ve 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 it’ll sell a 30% stake in its business on the stock market next month – 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+ – a group of the world’s biggest oil-producing countries – looks like it’ll 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 Arabia’s heavily oil-dependent stock market. And if investors start steering clear of the country’s stocks, Tadawul’s profits – and its eventual IPO valuation – could take a hit.
Zooming out: IPOs might run out of steam.
It’s been a record year for IPOs, with companies raising over $600 billion already this year. A lot of that’s to do with government and central bank support that’s 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 – and take the IPO boom along with them.
—
Originally Posted on November 22, 2021 – Destiny Calls
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Finimize and is being posted with its permission. The views expressed in this material are solely those of the author and/or Finimize and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
