Transparency needed in opaque KSA

Tadawul, Saudi’s stock exchange has witnessed the listing of its 14th petrochemical company. Petrochem is a joint venture between Saudi Industrial Investment Group (SIIG) and Chevron Phillips. The number of listed companies in the downstream sector shows how important, and how significant the petrochemical industry is in the minds of today’s Saudi investors.

The increase of listed companies comes in accordance with the regulation of the Kingdom which obliges companies to launch 25% stakes to Saudi citizens in order to be eligible for natural gas allocations.

This situation has encouraged petrochemical companies to list part of their shares on the market as the lucrative price of the feedstock is a very strong motive.

Many IPO s have been oversubscribed by over than 300%. Yes, more than 300% of the allocated shares. Despite the enthusiasm of Saudi Nationals to get behind their domestic petrochemical industry, investors are short changed when it comes to clear and reliable information about their investments.

This is a major challenge which must be overcome. The lack of transparency means investors have avoided investing in some companies. Worse still, many have sold their shares instead of sticking through like real stakeholders in the company, as official financial statements leave many unanswered questions which need clarification. One company, without citing names, has announced in an official clearing that it started commissioning its plant more than four times, and every time it says that the commissioning was successful? Every two or three months now it issues the same statement.

The market regulations authority would be well advised to act against such cynical announcements. Ultimately, companies need to be more honest and open with their investors and treat them with respect.

The majority of downstream companies are still fundamentally sound, and are sensible investments. It may take years to achieve real transparency, but paper performance is only one facet of success, and clearer information will keep investors onboard for the long run.

Abdelghani Henni is the editor of Petrochemicals Middle East.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM