Saudi Capital Market Authority approves new IPO regulations

The Capital Market Authority in Saudi Arabia has introduced new regulations to improve initial public offering (IPO) practices. These rules, effective upon publication, focus on enhancing the efficiency of verification, coverage, order book building, and pricing during public offerings. The aim is to increase transparency and protect investors by providing them with clear and comprehensive information, enabling them to make informed investment decisions.

A key aspect of these regulations is the requirement for underwriters to sign and activate the underwriting agreement before the book-building process begins. This commitment obligates the underwriter to purchase all offered shares at the start of book building. If the underwriter's acquisition leads to a breach of listing requirements under the listing rules, the issuer's shares will not be listed, and the underwriter must still purchase all offered shares. Underwriting agreements can include provisions for managing such shares.

Additionally, the rules introduce stricter controls on participation requests during book building. These requests must accurately reflect the actual available liquidity of the investors. Financial solvency verification for participation requests will only consider cash or cash equivalents and must be fully paid by the final subscription payment deadline outlined in the prospectus. This ensures that orders are tied to real liquidity or payment capabilities.

Lastly, issuers are mandated to disclose future forecasts and performance indicators in their prospectus and registration documents. These include forward-looking financial performance indicators for the period following the last financial period in the prospectus and at least for the subsequent financial year.