A look at listing requirements guidelines for Saudi market

The decision by a company to go public is a strategic move that requires careful planning, readiness and thorough preparation to ensure the success of the process.

According to the procedures in Saudi Arabia, the initial public offering (IPO) process is divided into two phases - preparation and share offering.

In the first phase, the company, with the help of advisors, prepares the internal regulatory documents for the offering, by preparing the registration and offering request, in addition to the appointment of financial advisors and external consultants.

The company undertakes the necessary legal, financial, commercial and administrative measures to ensure accuracy and compliance of all material information with the IPO documents. The company will also map out a business plan on goals and future expansions.

The firm, during this phase, issues the offering prospectus which includes the offering layout, regulatory disclosures as well as pledges and obligations.

After the completion of the preparation process, the company files a request to the Capital Market Authority (CMA) and the Saudi Stock Exchange (Tadawul) seeking approval for the IPO registration statement as well as the prospectus.

The company submitting the application for shares listing will have to pay the fee in accordance with what is determined by the financial market and CMA.

Listing conditions include that the issuer should be a joint stock company, and should have at least 200 public shareholders for listing on the main market and a minimum of 50 public shareholders for listing on Nomu-Parallel Market.  

The issuer must float at least 30% of its share capital for listing on Tadawul, and 20% of the issued shares, or SAR 30 million worth of shares, for listing on the parallel market, whichever is less. 

Tadawul, after obtaining approval from the CMA for the offering, can allow a lower percentage of share capital or public shareholders, in line with the number of shares of the same category and their allocation to the public shareholders.  

The issuer should have a minimum market capital of SAR 300 million for Tadawul and SAR 10 million for the parallel market. Tadawul might allow a lower market cap in case of sufficient market liquidity, after obtaining the CMA’s approval.  

The listing requirements also include the appointment of two representatives of the issuer for all purposes related to the listing, provided that one of them is a member of the board of directors and the other is a senior executive.

Upon obtaining the CMA approval, Tadawul-listed securities should provide data on the company’s core activities, logo, authorized capital, main contact information, end date of its fiscal year and information on receiving banks, underwriter and lead manager.

Once the CMA and Tadawul approve the application, the company will set the offering price range, conduct roadshows for investors, and start a book-building process. 

During the period, the lead manager will hold investor meetings with the company, while executives will hold presentations on core activities, financial performance and growth strategy.

On the final day of preparing the investor records, the underwriter will set the final offering price after reviewing the offers made by qualified investors before launching the IPO. 

After setting the offering price, the subscription for retail investors begins, followed by the final allocation of shares, depositing them in shareholders’ portfolios, and listing in the market.

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