Saudi Capital Market Authority approves new IPO regulations

The board of the Capital Market Authority has approved regulatory provisions related to the project aimed at improving initial public offering (IPO) practices, which will take effect from the date of their publication.

The Authority explained that these provisions are designed to develop the IPO framework by enhancing the efficiency of verification, coverage, order book building, and pricing processes in public offerings. This aims to achieve higher levels of transparency and investor protection, supporting their ability to make informed investment decisions based on clear and comprehensive information.

The approved rules strengthen the role and responsibility of the underwriter in the offering process by requiring the signing and activation of the underwriting agreement before the start of the book-building process. The underwriter’s commitment to purchase all offered shares becomes effective at the beginning of book building.

If the underwriter’s acquisition of the offered shares results in a breach of the listing requirements under the listing rules, the issuer’s shares will not be listed, and the underwriter must purchase all the offered shares. The underwriting agreement may include a mechanism for handling these shares.

The provisions also impose additional regulatory measures on participation requests submitted during book building, including verifying that these requests reflect the actual available liquidity of the investor. Financial solvency verification for requests from participating entities is limited to cash or cash equivalents only, and such requests must be fully paid by the final subscription payment deadline as specified in the prospectus, ensuring that orders are tied to actual liquidity or payment capability.

The rules also require issuers to disclose in the prospectus and registration document their statements and future forecasts, including forward-looking financial performance indicators for the period following the last financial period included in the prospectus or registration document, as well as at least the subsequent financial year.