Saudi IPO Rules Require Underwriters to Buy All Offered Shares

By Olivia Hart

Saudi Arabia’s new initial public offering (IPO) rules took effect on November 2 and require underwriters to commit to purchasing all shares offered once book-building starts. The Saudi Capital Market Authority (CMA) approved the provisions, which cover three areas:

• Underwriting: Underwriters must finalize agreements before book-building begins and commit to purchasing all offered shares.
• Investor participation: Subscription orders must reflect actual financial capacity.
• Financial disclosure: Companies must disclose forward-looking forecasts, performance indicators, assumptions and risks in prospectuses and registration documents.

The CMA says the package should strengthen transparency, improve the quality of public offerings and make the Saudi capital market more attractive to businesses and investors. Those aims require disciplined execution across the listing process. The provisions set no targets for investor protection, issuance activity or market attractiveness.

What changes for underwriters?

Under the CMA’s framework, underwriters must finalize their agreements before book-building begins. They also must commit to buying the entire offered share allocation once that process starts. Together, the requirements remove the option to leave final purchase commitments open while orders are being gathered.

The CMA also places greater accountability on companies, underwriters and financial advisors throughout the IPO process. Its summary does not specify how regulators would enforce an underwriter failure, whether purchase commitments carry price protections or whether any financial test governs an adviser’s role. It also gives no separate reporting obligation for advisers.

Takeaway: Underwriters must have a completed agreement before book-building and a commitment to the full offered allocation once it begins.

How are investor checks tightening?

The CMA requires subscription orders to reflect investors’ actual financial capacity. Institutional investors must demonstrate that capacity through cash or cash equivalents. The CMA summary does not define “actual financial capacity,” name eligible cash equivalents or set a minimum balance.

The CMA’s wording applies the capacity test to subscription orders generally while specifying cash or cash equivalents for institutional investors. The summary does not say whether non-institutional investors must provide equivalent evidence or how institutions document holdings. That leaves an implementation detail unresolved.

The CMA presents these controls as a way to give investors a more reliable basis for assessing potential listings. No numerical threshold, verification timetable or sanction for an unsupported order appears in the summary. Those are material gaps for investors deciding whether an order is fully backed.

The CMA plans to issue a series of frequently asked questions to clarify implementation. The summary gives no publication schedule and does not say whether the FAQs will address capacity thresholds or documentary evidence. Businesses cannot determine from the current provisions alone how far the checks will extend.

Takeaway: Investors must show real capacity, but the CMA has not defined a measurable test or verification standard.

What must companies disclose?

Companies preparing to list must disclose forward-looking financial forecasts and performance indicators. The disclosures must appear in prospectuses and registration documents. They must also include the assumptions and risks underpinning the projections.

For businesses considering a Saudi Exchange listing, the CMA says the package means greater scrutiny of financial projections, disclosure practices and underwriting arrangements. The mandate reaches both core offering documents. It does not prescribe a common forecast format, a standard set of indicators or a uniform way to present risks.

The new requirement goes beyond presenting past financial results by asking issuers to expose the basis for expected performance. That can help investors compare forecasts, but only if issuers use consistent assumptions and indicators; the CMA summary specifies neither.

The CMA summary does not identify who must sign off on assumptions, whether an independent reviewer is required or what happens when projections prove wrong. It also gives no required update process for changing forecasts.

Takeaway: Issuers must show expected results and the assumptions and risks behind them, without revealing a required format.

What remains unresolved after November 2?

The provisions took effect on November 2, according to the CMA. The CMA will issue a series of FAQs to clarify implementation, but the summary gives no publication schedule. Its treatment of IPO applications already in progress is also unstated.

Businesses weighing a Saudi Exchange listing therefore face immediate scrutiny but incomplete procedural detail. The summary does not identify fee changes, processing deadlines or additional listing criteria tied to the new rules. That matters because the CMA includes making the market more attractive to businesses among its stated aims.

The next milestone is the CMA’s FAQ series, which could determine whether the November 2 rules function as meaningful safeguards or mainly add procedural friction. Any conclusion about better offerings or investor confidence must wait for that guidance and evidence from any listings under the regime.

Takeaway: Until those FAQs and any live listings provide evidence, the November 2 regime specifies tighter safeguards without demonstrating their practical effect.