The Capital Market Authority's ("CMA") Board issued its resolution approving the amendments to the Instructions for Book Building Process and Allocation Method in Initial Public Offerings (IPOs), which shall be effective as of 8/6/1444H corresponding to 1/1/2023G.
The main amendments included stipulating the role of the financial advisor in coordination with the issuer to allocate a percentage of the offering to public funds provided that the Authority approves such percentage, and in the event there is insufficient coverage from public funds for the percentage allocated to them, the said percentage shall be reduced within the limits of what was covered by the public funds. These amendments come as part of developing the allocation percentage for individual investors, whether directly, or indirectly through individuals' ownership of units in public funds.
The amendments also included giving the financial advisor the powers for determining the parties eligible for participating in the Book Building Process among the parties stipulated in the Instructions, provided that public funds are among them.
To ensure the efficiency of the Book Building Process and the pricing of the offering , and as part of the capital market institutions' responsibilities to comply with practicing their business with skill, care, and diligence, as well as complying with appropriate conduct in the market, the Instructions emphasizes the obligation of the issuer's financial advisor and any other capital market institution that is associated with receiving bidding participation applications to make the necessary arrangements and procedures to ensure documenting the bidding participation applications and verifying their validity, as well as verifying the financial solvency of the participating entities and their ability to pay the value of the shares requested in the bidding participation application when allocated to them, before registering bidding participation applications.
The amendments of the Instructions come as a result of the CMA's continuous efforts aiming to regulate the Book Building Process and Allocation Method in Initial Public Offerings, and following the review of the best practices in the global markets. The CMA has published the draft of amended Instructions for Book Building Process and Allocation Method in Initial Public Offerings for public consultation for a period of (30) calendar days, ended as of April 14, 2022. The CMA has considered all opinions and comments it received during the public consultation, which were duly reviewed and studied for the purpose of finalizing the amendments. The CMA also has received the opinions and comments of relevant and interested persons, through the Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform), affiliated with the National Competitiveness Center (NCC) as a part of the CMA's continued efforts to communicate and consult with the investors, as well as governmental and private bodies regarding draft implementing regulations and amendments thereof prior to issuing them.
The amended Instructions for Book Building Process and Allocation Method in Initial Public Offerings can be viewed via the following link:
Instructions for Book Building Process and Allocation Method in Initial Public Offerings
