aljazeera.com
Economy|Financial Markets
Wall Street finds Saudi Arabia still frugal when it comes to fees
Despite a blitz of offerings this year, Saudi IPO riches have yet to manifest for global banks.
Wall Street heavyweights like JPMorgan Chase & Co, Goldman Sachs Group Inc and Citigroup Inc have flocked to Saudi Arabia, hiring teams on the ground and sending in their top executives to sway local officials in the hope of winning advisory roles for initial public offerings (IPOs) [File: Bloomberg]
By Reema Alothman and Matthew MartinBloomberg
20 Sep 2021
The latest crop of Saudi Arabia’s market newcomers is proving just as frugal when it comes to paying investment bankers.
Despite attracting $125 billion in orders from investors for an initial public offering of Saudi Telecom Co.’s internet-services unit, banks including Morgan Stanley and HSBC Holdings Plc are set to share just about $12 million in fees, Arabian Internet and Communications Services Co., also known as solutions by stc, said in its prospectus.
That’s just 1.3% of the offering value, compared with an average of about 5% or more for IPOs in the U.S. or Europe. Morgan Stanley alone had a bigger payday during UiPath Inc.’s $1.54 billion IPO in April, which generated a total of $67 million in fees.
The Saudi deal’s pot also gets split between a local bank, auditors and legal advisers — and will even be used to cover the cost of printing the prospectus.
IPO riches have yet to materialize for global banks despite a bonanza of share sales this year. Wall Street heavyweights like JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. have still flocked to the kingdom, hiring teams on the ground and sending in their top executives to sway local officials in the hope of winning advisory roles.
The financial rewards were meager even in the case of Saudi Aramco’s record offering in 2019, which raised almost $30 billion but paid out just over $100 million – split between more than 20 banks, with the bulk of the fees going to Saudi lenders after foreign investors didn’t take part in the deal.
If anything, that was an improvement over the IPO of Saudi Arabia’s biggest bank in 2014, when advisers including HSBC reaped $6.7 million in fees, or just 0.1% of the $6 billion offering size.
A bigger payday awaits investment banks working on Saudi Arabia’s first $1 billion initial public offering since Aramco – with a caveat.
Lenders and advisers including JPMorgan and Citigroup are set to share $42 million in fees from ACWA Power’s IPO that launched just after the offering by solutions by STC.
While that represents about 3.5% of the $1.2 billion deal size, banks were mandated more than three years ago, meaning the return over time is modest at best.
SOURCE: BLOOMBERG
RELATED
Saudi budget deficit narrows thanks to oil, tax revenue boosts
Saudi Arabia saw its oil revenue rise 38 percent in the second quarter of 2021 compared to the same period last year.
9 Aug 2021
Saudi Aramco looks to spend $20-25bn on a Reliance stake: Report
The Saudi firm is discussing the purchase of a roughly 20-percent stake in Mukesh Ambani’s Reliance.
16 Aug 2021
SoftBank ventures into Saudi Arabia in a deal with wealth fund
SoftBank has partnered with Saudi Arabia’s sovereign wealth fund and plans to expand into the Middle East and Africa.
15 Sep 2021
MBS plans overhaul of Saudi education system to boost workforce
Overhaul aims to align educational outcomes with the needs of the jobs market.
15 Sep 2021
MORE FROM ECONOMY
‘Squid Game’ frenzy lures new subscribers to Netflix
Love them or hate them: Cryptocurrencies are here to stay
Facebook settles US claims it favoured foreign workers
Brent crude closes above $85 a barrel for first time in 3 years
MOST READ
‘Detected and blocked’ Indian submarine incursion: Pakistan army
Does getting the flu with COVID double your risk of death?
As Arab states normalise with Assad, US faces ‘dilemma’ in Syria
UK under pressure to reimpose restrictions as COVID cases soar
Follow Al Jazeera English:
© 2021 Al Jazeera Media Network