Saudi Arabia's market regulator proposes tighter rules for IPOs after market slowdown

DUBAI: Saudi Arabia’s market regulator has proposed tighter rules for initial public offerings, as it seeks to strengthen a market hit by a sharp slowdown in listings, according to a statement released this week.

Saudi Arabia’s IPO market has slowed significantly in 2026 due to an escalating Middle East conflict and the proposed rules would strengthen investor protections and market transparency, while shifting more of the execution and funding risk associated with IPOs onto institutional investors and underwriters.

The rules are aimed at boosting confidence in Saudi capital markets by increasing transparency and strengthening the IPO framework, the Capital Market Authority said.

Saudi Arabia’s IPO market has struggled to bounce back after a post-pandemic rush, with Mutlaq Al-Ghowairi Contracting Company calling off plans to list in what would have been one of the region’s largest flotations this year.

Under the draft rules, institutional investors participating in the book-building process will need to show that they have the liquidity and ability to pay for the IPO orders being backed by them.

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The underwriting agreement would need to come into effect before the book-building process even begins, the CMA said adding that once it begins, banks would have an obligation to purchase all shares offered.

Book-building is the process used by an institutional investor, or the underwriter, to determine the price of a security.

If shares acquired by the underwriter fail to meet listing requirements, the issuer’s shares would not be listed, the CMA said. But, underwriters will still have an obligation to purchase all offered shares.

The CMA said the draft rules include the mandatory disclosure of forward-looking statements, forecasts and financial performance indicators.

The market regulator is seeking public feedback on the proposals through October 22.

Equity issuance in the Middle East and Africa reached $2.1 billion in the first half, down 71% from a year earlier, according to LSEG data - the lowest since 2020.