Saudi regulator seeks public input on secondary offering rules

RIYADH – The Capital Market Authority (CMA) of Saudi Arabia is inviting public feedback on a proposed regulatory framework designed to govern secondary offerings in the nation’s capital market. The new regulations are aimed at enriching the market’s attractiveness by increasing the number of tradable shares and expanding the investor base.

The draft, which was released today, outlines several key requirements for shareholders interested in conducting secondary offerings. Among these, shareholders are obliged to hire a financial advisor certified by the CMA and must inform the authority at least fifteen days before the planned sale date. Furthermore, there are designated holding periods for shares retained after public secondary offerings, including those on the Nomu-Parallel Market.

To determine share prices and allocations, book building procedures will be employed, alongside mechanisms intended to maintain price stability after the offering. Stakeholders have until December 21, 2023, to submit their comments on the draft through the national competitiveness center’s online platform or via a specified email address.

The CMA’s initiative is expected to refine the impact of secondary offerings on Saudi Arabia’s financial landscape and is seen as a critical step for integrating the Saudi market into global emerging market benchmarks. Secondary offerings are lauded for their role in enhancing pricing accuracy through heightened transparency and for their contribution to market liquidity and investor diversification.

The Public Investment Fund has already set an example with its landmark secondary public offering of Saudi Telecom Co.’s shares in 2021, which improved free-float percentages. The proposed framework includes detailed strategies for managing order books, ensuring fair allocation of shares, and maintaining price stability throughout these transactions. This move by the CMA marks a significant effort to align Saudi Arabia’s capital market practices with international standards and to attract more domestic and international investors.

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