CMA wants banks to guarantee IPOs and investors to fund their bids

The Capital Market Authority (CMA) is proposing to rewire how Saudi companies go public. Three changes sit at the core of draft provisions aimed at the same target: the gap between the demand a company appears to attract at IPO and the demand that shows up once it trades. The draft opened for public consultation on Istitlaa on 22 September and runs for 30 days, through 22 October. If approved, the provisions take effect 2 November.

The biggest change lands on the banks: The draft would require the underwriting bank to commit firmly and early. The underwriting agreement must be signed and in force before book building — the stage where the bank sounds out large investors to set the price — begins, and from the moment it starts, the bank is obligated to buy any shares investors don’t take, up to the entire offering. If taking up those shares leaves the issuer short of the listing requirements, the shares don’t list, and the underwriter buys the whole offering anyway.

That turns banks into “genuine backstops rather than facilitators of IPO demand,” Ubhar Capital head of research Tahir Abbas told Bloomberg, giving them more reason to scrutinize inflated or weakly funded bids when they carry the risk of the full offering. The practice is common in the US and Europe.

The other two changes go after the order book itself. When large investors place bids during book building, the financial advisor, and any other Capital Market Institution taking orders, would have to verify that each bid is backed by actual available liquidity (cash or its equivalents). Orders would also have to become binding by the subscription payment deadline set in the prospectus. Issuers, meanwhile, would have to disclose at least a year’s worth of forward-looking statements and forecasts, including financial performance indicators, based on “reasonable and measurable assumptions,” with the financial advisor responsible for vetting them.

Why it matters: The draft addresses one of the problems that have held back Saudi issuance this year. Companies keep drawing triple-digit oversubscription at IPO and then sliding once they list. Fund managers have told us the two don’t move together, with heavy oversubscription a poor guide to how a stock trades after the bell. Only four of the 17 companies to go public on the kingdom’s main market since the start of 2025 are trading above their issue price, according to data compiled by Bloomberg. Our read of last year’s group is starker: six of the seven companies that listed on Tadawul in 2025 ended their first year below their offer price, down around 27% on average.

DATAPOINT- Just three companies have gone public in Saudi this year — Dar Al Balad (DBS), Saleh Abdulaziz Al Rashed, and MSGA — raising SAR 522.6 mn, around 4% of the SAR 13.27 bn that 25 companies raised over the same eight months of 2025. Bloomberg puts the full-year Saudi IPO haul at about USD 144 mn, the weakest in years.

Order-book quality is one factor among several here. The market participants we've spoken with agree the mechanics need fixing. “Book building needs to be genuine price discovery rather than simply a mechanism for validating the highest achievable valuation,” EQCM founder and CEO Osama Alowedi previously told EnterpriseAM. But the drought has structural factors weighing it down too. Higher-for-longer rates have lifted the cost of equity and pushed valuations down, this year’s geopolitical volatility pushed issuers to delay rather than launch into a jittery market, and owners have been reluctant to list at the prices a bruised market will pay. Those causes sit largely outside what this draft addresses.

BACKGROUND- The draft builds on a run of CMA moves to reshape the IPO process. Earlier measures pushed issuers to reserve as much as 30% of an offering for retail investors. The consultation also lands after the regulator’s scrutiny of how 2025 listings were priced and allocated, and shortly after Mazen Al Sudairi took over as CMA chairman — a capital-markets veteran from some of the kingdom’s biggest banks.