Saudi firms pull IPO plans

Three Saudi companies have scrapped plans for initial public offerings that were scheduled over the next month because of expectations of weak investor demand as the Iran war weighs on sentiment, according to people familiar with the matter.

The decision suggests the companies believe that foreign investors remain wary of putting new money into the kingdom's stock exchange, and will likely put off other firms planning IPOs in the short term. That will be a blow to the owners of companies that were considering going public, including Public Investment Fund.

The three companies — bottled drinks company Berain Water, lubricants and automobile servicing business Petrolube, and Facilities Management Company — have made the decision in recent days in coordination with the Capital Market Authority (CMA), the regulator, the people said.

The CMA is also keen to make sure the first IPOs under new chairman, Mazen Al Sudairi, are a success, according to one of the people.

Berain and Petrolube declined to comment; CMA and Facilities Management didn't respond to requests for comment.

Earlier this year construction company Mutlaq Al Ghowairi pulled a share sale because of weak investor demand. The deal, which would have valued the company at $799 million, was the first significant IPO to test investor appetite in Saudi since the onset of the Iran war in February.

PIF had been considering a fresh wave of stock offerings in companies it controls this year and next, pinning its hopes on a stock market revival as a way to raise cash to fund new investments.

Under the CMA's rules, firms are given a six month window to complete a share sale after receiving approval from the regulator. If they don't complete an offering within that timeframe they have to restart the process. The three firms that just put their IPO plans on hold have until the end of September to either complete an offering or reapply to the regulator for listing approval.

The companies are expected to reapply for IPO approval when market conditions improve, the people familiar with the matter said.

Gulf markets have been volatile since the Iran conflict began, with the Saudi bourse recovering initial losses to be up almost 7% since the start of the year. The bourse declined more than 12% last year. The Dubai Financial Market is down nearly 3% over the same period, and the main Abu Dhabi index is up by 0.4%.

Saudi Arabia's stock market regulator is investigating the poor performance of recent IPOs, including looking into the advice given by investment banks as it tries to kickstart new listings, Semafor reported .