The Capital Market Authority's (CMA's) Board approved the regulatory provisions to enhance the initial public offering (IPO) practices, to be effective from the date of their publication.
The approval of these regulatory provisions comes as part of the CMA's ongoing efforts to develop the capital market, develop procedures aimed at mitigating risks associated with securities transactions, and regulate and monitor the activities and operations of entities subject to the CMA's regulation and supervision.
The approved regulatory provisions include strengthening the role and responsibility of the underwriter in the offering process, by executing the underwriting agreement and having it become effective before the commencement of the book-building process, with the underwriter's obligation to purchase all shares offered becoming effective upon the commencement of the book-building process. If the underwriter's ownership of the offered shares results in a failure to meet the listing requirements under the Listing Rules, the issuer's shares shall not be listed, and the underwriter shall purchase all shares offered. The underwriting agreement may also include a mechanism for the disposal of such shares.
The approved regulatory provisions also require additional regulatory procedures in relation to the participation orders submitted during the book-building process, which include verifying that the participation orders submitted reflect the actual value of liquidity available to the investor, limiting the acceptable means of verifying the financial capacity of orders submitted by participating entities to cash or cash equivalents, and ensuring that such orders become binding for payment no later than the deadline for payment of the subscription amount, in accordance with the timeline specified in the prospectus, thereby strengthening the link between orders submitted during the book-building process and the liquidity or actual ability to pay.
In addition, the approved regulatory provisions require the issuer to disclose, in the prospectus and the registration document, the forward-looking statements and forecasts relating to it, including forward-looking financial performance indicators, for the period covering the remainder of the latest financial period included in the prospectus/registration document, in addition to at least the financial year following that period, while verifying that the forward-looking statements and performance forecasts are clear, not misleading, and based on reasonable and measurable grounds. The provisions also require the financial advisor, when advising the issuer on such forward-looking statements and performance forecasts, to exercise the necessary professional due diligence to reach a reasonable opinion thereon.
The approved regulatory provisions will also contribute to reinforcing commitment to the participation orders submitted during the book-building stage in accordance with the approved regulatory provisions, enhancing discipline and the efficiency of the offering process, and strengthening the integration of the roles and responsibilities of the underwriter in the offering process from the book-building stage, as well as the roles of the issuer, financial advisor, and participating entities. This would enhance the alignment of interests among the relevant parties and increase the reliability of information available to investors through clear disclosure of the methodology used in preparing forward-looking statements and forecasts, the material assumptions on which they are based, and the key risks and factors that may affect the achievement of such forecasts or cause actual results to differ from them.
In addition, the approved regulatory provisions would contribute to enhancing initial public offerings, as well as improving the attractiveness of the Saudi capital market by increasing transparency and strengthening the environment for conducting initial public offerings.
The CMA had published, on 22 September 2026, the draft “Regulatory Provisions Associated with the Draft to Enhance IPO Practices" on the Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform), affiliated with the Saudi Competitiveness & Business Center, and the CMA's website, for a period of (30) calendar days, for public consultation.
For further clarification and detail, a number of questions and answers regarding the regulatory provisions to Enhance IPO Practices will be published within the FAQs for Implementing Regulations.
