Saudi Wealth Fund Rakes In $5 Billion as Demand for Stocks Booms

(Bloomberg) -- Saudi Arabia's wealth fund is delivering on plans to sell off stakes in local companies by raking in about $5 billion over the past three months alone.

The Public Investment Fund is set to raise $820 million from an initial public offering of digital security firm Elm Co. next month after selling shares at the top of the pricing range.

That's in addition to the $3.2 billion it raised from divesting shares in Saudi Telecom Co., the largest secondary offering in the Europe, Middle East and Africa region last year. It also raised $1 billion from selling a stake in the Saudi stock exchange in December.

Ebullient equity markets have emerged as a source of additional liquidity for sovereign funds in the Middle East last year. Abu Dhabi's Mubadala Investment Co. raised over $3 billion in the IPOs of GlobalFoundries Inc. and satellite operator Yahsat.

Share sales in Saudi Arabia have seen huge investor demand, with most IPOs getting priced at the top of offering ranges and surging on their trading debut.

In total, Saudi companies raised $9.3 billion since the start of last year. The Saudi benchmark index has jumped about 9% this year, extending its 2021 gains of 30%.

In March, Crown Prince Prince Mohammed Bin Salman urged the PIF to sell off large stakes in companies it has held for a long time, saying it shouldn't hold investments “forever.”

The proceeds from the share sales will be a welcome boost for the PIF, which is planning to invest about $40 billion into the Saudi economy this year as it looks to drive the crown prince's plan to diversify the country's economy away from oil by investing in areas like entertainment and tourism that barely existed in the kingdom before 2016.

The sales also mark a shift in strategy. For decades a sleepy holding company for government stakes in local firms, its looking to recycle its capital, selling off shares in companies it has held for years to invest in new firms. It still holds almost $140 billion of Saudi equities, including large stakes in Saudi National Bank, Saudi Arabian Mining Co., and Saudi Electricity Co.

At the same time, the PIF is planning to plow deeper into global equity markets this year by investing about $10 billion more into listed stocks, as it pursues the goal of more than doubling its assets by 2025. So far, it's amassed around $500 billion in assets.