Here's how nominal value changed on Tadawul over time

Tadawul trading screen

The decision to allow splitting a stock’s nominal value on the Saudi Exchange (Tadawul) came into effect with the start of the implementation of the new Companies Law on Jan. 19, 2023.   

In this report, Argaam highlights the previous changes to the nominal value, its definition and impact such modifications have on companies and investors.   

Nominal value is the value recorded on a security – common shares, preferred shares, and bonds – upon issuance. It is not the value paid when the security is offered for subscription, as a security may be issued at a premium or a discount to the nominal value.     

The action aims to reduce per share price and increase the number of tradeable shares, maximizing trading opportunities for the largest possible number of investors. 

Stock split becomes essential when share prices double over time, hitting high levels that are no longer affordable for everyone.   

Returning to the historical development stages, the nominal value of shares in the early start of Tadawul was different from one company to another. However, most were estimated at SAR 100, except for some companies and banks.   

For instance, the nominal value of Riyad Bank was estimated at SAR 1,000 in 1987. The bank capital increased from SAR 50 million to SAR 200 million in the same year via a 1-for-3 bonus-share distribution. The stock’s nominal value was split from SAR 1,000 to SAR 100.   

In May 1997, the Cabinet approved the GCC Supreme Council’s resolution on unified rules for GCC citizens’ ownership and trading of joint-stock companies’ shares in the GCC member states.   

In January 1998, the resolution entered into force and was followed by another one to split the nominal value of most joint-stock companies from SAR 100 to SAR 50 as of January 1998.   

In March 2006, the CMA decided, in compliance with the Cabinet’s decision, to decrease the nominal value of joint-stock companies to SAR 10.  

It is worth mentioning that Saudi Arabian Oil Co. (Saudi Aramco) was listed in Tadawul without a nominal value, while Americana Restaurants International PLC (Americana) was dual-listed at a nominal value of SAR 0.08.   

The new Companies Law allowed canceling the minimum nominal value of a share and permitted companies to determine the same in bylaws. It also provides a stock split and stock consolidation to allow a lower or higher nominal value, respectively.   

According to the Executive Regulations, shares may not be issued for less than their nominal value. However, they may be issued higher than their par value if provided for by the company’s bylaws and approved by its extraordinary general meeting (EGM).   

In this event, the difference in value is outlined in a separate clause under shareholders’ equity and may not be distributed as a cash dividend. Meanwhile, it can be used in capital increase via bonus issues. The difference can also be optimized to offset losses after running out of all profit reserves.    

As per the Executive Regulations, stock split and merger shall be subject to the company’s articles of association. The board of directors shall prepare a stock split or merger proposal, supported with reasons and the expected consequences on the company’s shareholders.   

The proposal shall also mention the share percentage entitled for each shareholder after a split or merger. Shareholders shall receive the proposal at least 21 days before the EGM and the stock split or merger is subject to shareholders’ approval.    

Until now, 19 companies listed in Tadawul and Nomu-Parallel Market have announced their board of directors’ recommendations for SAR 10 nominal-value-split.   

The recommendations included splitting the nominal value into SAR 1, SAR 0.5 and SAR 0.1, as shown in the following table:   

The companies affirmed their commitment to complete all necessary procedures related to the stock split.   

So far, shareholders of National Environmental Recycling Co. (Tadweeer) and Al Kathiri Holding Co. approved stock split. Both stocks are trading at the new par value.