The investment fund “STC” collected 3.86 billion riyals from the sale of 2% of shares
Goldman Sachs Saudi Arabia and NCB Capital announced the successful sale of a 2% stake in Saudi Telecom Company (STC). This sale sets the price at 38.6 Saudi Riyals per share, generating an estimated income of 3.86 billion riyals.
After the sale, the public investment fund will own 62% of STC’s total shares, amounting to 3.1 billion shares. The remaining shares will have a 90-day lock-up period before they can be traded.
This offer received significant interest from both local and international investors, exceeding the total offer size. It marked one of the largest accelerated order book processes in Saudi Arabia and the MENA region, highlighting investor confidence.
The fund emphasized the importance of its strategic role in STC, particularly in Saudi Arabia’s communications and information technology sector, which is a significant part of its investment strategy. The share sale is part of the fund’s plan to recycle capital and invest in new sectors.
The completion of the sale occurred on Thursday, November 14, 2024, outside of market hours, following the approved procedures of the Saudi Tadawul. The offering targeted institutional investors in Saudi Arabia and qualified foreign institutions, adhering to regulations under the US Securities Act.
What impact does the Saudi Public Investment Fund’s stake in STC have on the telecommunications sector in Saudi Arabia?
Interview with Hisham Abu Jamea, CEO of Mekeal Financial Technologies
Interviewer: Thank you for joining us today, Hisham. The recent sale of a 2% stake in Saudi Telecom Company (STC) by Goldman Sachs in collaboration with NCB Capital has garnered significant attention. Can you explain the significance of this sale in the current market context?
Hisham Abu Jamea: Thank you for having me. This sale is tremendously significant, not just for STC, but also for the Saudi stock market and the broader MENA region. It reflects a robust interest from both local and international investors, with demand exceeding the total offer size. The fact that it involved one of the largest accelerated order book processes in the region demonstrates that investor confidence is strong, even amidst global uncertainties.
Interviewer: The sale set the price at 38.6 Riyals per share, with an estimated income of 3.86 billion riyals. How does this pricing strategy fit into conventional practices within such transactions?
Hisham Abu Jamea: Pricing is crucial in any sale like this. Setting the share price at a 6% discount to the previous closing price is a common strategy designed to attract a broader base of investors. It makes the investment more appealing, while still tapping into STC’s strong market position. As this was targeted toward institutional investors, the discount did help in enhancing participation and securing robust demand.
Interviewer: The public investment fund now holds a 62% stake in STC. What does this imply for the future of STC and the fund’s strategy?
Hisham Abu Jamea: The public investment fund’s increased stake indicates a strategic intent to reinforce its influence in the ICT sector in Saudi Arabia. The fund emphasizes recycling capital to invest in new sectors, which is critical for growth. By gradually exiting certain investments like this one, they can ensure they are maintaining a balance between risk and return while still sustaining their long-term investment goals.
Interviewer: You mentioned that the shares are in a strong position. Could you elaborate on why STC shares are viewed positively by investors?
Hisham Abu Jamea: Absolutely. STC has been pivotal in Saudi Arabia’s communications landscape. The underlying financial health of the company, coupled with its strategic importance in the ICT sector, makes it an attractive option for investors. Even as the fund looks to exit certain investments, it recognizes that the market can absorb these changes without significant disturbances—this reflects positively on the stock.
Interviewer: Hamad Al-Olayan outlined several reasons for the fund’s decision to partially exit STC. How do you see these factors influencing market dynamics?
Hisham Abu Jamea: Hamad’s points are well-taken. By enhancing market depth and increasing liquidity, the fund is not only hedging its risks but also enabling the market to become more competitive. This also facilitates the entry of foreign investors, with about 40% of the shares purchased by them in this offering. All these factors combined can significantly increase market activity and investor interest, which is vital for the long-term stability of the Saudi market.
Interviewer: Given this robust interest in STC shares, what implications do you foresee for future investments in the Saudi ICT sector?
Hisham Abu Jamea: The strong demand for STC shares underscores the attractiveness of the ICT sector in Saudi Arabia. This confidence could lead to increased investments in related companies and sectors. As more financial tools and opportunities become available, I anticipate seeing a ripple effect where investors look to diversify into other promising segments of the ICT landscape. With ongoing governmental support and strategic reforms, the growth trajectory appears promising.
Interviewer: Thank you for your insights, Hisham. It’s been a pleasure discussing the implications of this significant sale with you.
Hisham Abu Jamea: Thank you for having me. It’s crucial we continue to analyze these developments as they unfold in our dynamic market.
Hisham Abu Jamea, CEO of Mekeal Financial Technologies, stated that the sale aligns with the fund’s strategy to gradually exit certain investments. He noted that STC shares are in a strong position, making them attractive for investment exit without impacting market stability.
The share price was set at a 6% discount to the previous closing price, a common practice in private deals to attract investors. About 40% of the shares were purchased by foreign investors, indicating increased foreign liquidity.
Hamad Al-Olayan, CEO of Villa Financial Company, highlighted five reasons for the public investment fund’s decision to partially exit STC: enhancing market depth, increasing liquidity, reducing risk, achieving profits, and capital rotation. The share price valuation and participation from numerous investors contributed to strong demand for the offering. Olayan also noted that activating previously unused financial tools could further attract investment and boost market liquidity.