CMA luring family firms to Saudi stock market

15/05/2012 08:55 AST

Capital market authority (CMA) is conducting talks with some of family-owned companies to have them listed on local Saudi stock exchange (Tadawul), according to financial sources. CMA plans to attract as many family companies as possible into the local exchange market amid CMA assurances that the number of listed companies is small and stands at only 152 companies, the experts said.

Many of family companies have recently assigned financial firms to study terms and conditions of the CMA related to trading and listing procedures.

Economic expert Walid Al-Subaie says family companies are an added value to Saudi economy where many of them enormously contributed to the development of business and trade environment in the Kingdom with their capitals exceeding billions of riyals.

Many of these companies have realized significant growth thanks to efforts of their founders but later witnessed disputes when owners of second generation failed to cope with market requirements which necessitated shift from individual investment to the corporate investment on clear-cut regulatory and legal basis and objectives, he said.

Due to poor financial structures, many of family companies were more vulnerable to the global financial crisis and, further, some of them were blamed for faltering of foreign banks as a result of excessive confidence in granting credit facilities, he said.

At the local level, many companies suffered losses because they used short-term loans to finance long-term assets, so listing of family companies will help them avert collapse and boost their continuity, he said.

Another economic expert Muhammad Al-Salim says CMA's initiatives is positive but, however, the companies have to take a series of regulatory steps to meet the capital market requirements.

He stressed the role of family companies in the Saudi economy whose capital is touching some SR 500 billion. Many of these companies witnessed disputes in the last decade due to death of founders and expansion of their activities, he said.

Arab News