Saudi Capital Market Authority proposes stricter IPO rules to boost transparency

The Saudi Capital Market Authority has introduced proposals for more stringent initial public offering (IPO) regulations, with the aim of boosting market transparency and investor protection. The proposed changes are part of the authority's "IPO Enhancement Project," which is set to be reviewed until October 22, 2026. These new rules are a response to a significant dip in listings during 2026, which has been linked to escalating tensions in the Middle East.

The Saudi Capital Market Authority outlined the new regulations in a statement posted on its website. The authority believes these changes will make the Saudi financial market more attractive for investors and improve the overall environment for IPOs. However, the market has struggled to recover since the post-pandemic surge, as evidenced by the recent cancellation of a planned listing by Mutlaq Al-Ghowairi Contracting, which would have been one of the largest IPOs in the region this year.

Under the proposed rules, investment institutions involved in the book-building process will be required to demonstrate they have sufficient liquidity and the capacity to meet their committed IPO orders. The underwriting agreement will be valid before the commencement of book-building, and banks will be required to purchase all offered shares once the process begins.

The draft rules make it clear that the underwriter will be responsible for buying all shares in the offering from the start of book-building. Should the underwriter fail to meet the listing requirements, the issuer's shares will not be listed, and the underwriter must purchase all the shares.

Furthermore, the draft mandates the disclosure of data, forecasts, and financial performance indicators. The financial advisor must exercise professional care when making statements about future performance. Interested parties and market participants have been invited to submit their feedback on the new regulatory provisions within 30 days, with the deadline set for October 22, 2026.

According to data from the London Stock Exchange Group, equity offerings in the Middle East and Africa amounted to $2.1 billion in the first half of the year, a 71% decrease compared to the previous year, marking the lowest level since 2020.