Saudi Arabia's Capital Market Authority approved controversial IPO rule changes despite strong objections from banks and industry groups. The amendments, effective immediately, include provisions requiring underwriters to purchase unsold shares during initial public offerings. Market participants criticized the regulator for minimal changes during a 30-day consultation period.
Industry experts warn the rules could fundamentally alter the firm-commitment offering structure, potentially shifting significant risk back to sellers. The changes come as Saudi Arabia's IPO market faces its weakest period in years, hampered by regional conflict. Since April, no new companies have been cleared for listing on the main market despite a promising pipeline.
The regulator aims to address concerns over lofty valuations and companies missing earnings guidance post-listing. However, critics argue the rules, particularly those requiring underwriters to take unsold shares, will push substantial risk onto banks. This could limit participation in the market, with underwriters potentially seeking higher fees and more conservative pricing.
The overhaul is part of broader reforms under new CMA Chairman Mazen Al Sudairi. Separately, the regulator is negotiating changes to foreign ownership limits, with Morgan Stanley estimating removing the 49% cap could attract $7.4 billion in inflows. For now, the IPO tweaks risk meaning even fewer deals in an already quiet market.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing