Saudi Capital Markets Authority preparing IPO reforms

The Saudi Capital Markets Authority (CMA) is preparing a package of reforms to address a “striking” drop in traded stocks and the performance of newly listed companies, its chairman Mazen Al-Sudairi has said.

The reforms, due to be introduced in the next 90 days, include plans to increase the retail investor share in initial public offerings and tighten regulation of algorithmic trading and short-selling.

The package follows a series of public consultations and new regulations announced by the CMA since Al-Sudairi took the position in August.

The reforms aim to address a poor run of recently listed stocks, falling retail investor participation and a decline in overall market value over the past two years, Al-Sudairi told Al Arabiya Business in his first media interview since taking office.

“These structural changes called for reform,” he said.

Al-Sudairi said the CMA is considering mandating a 30 percent minimum quota of IPOs to be offered to retail investors.

Further reading:

• More transparency sought from listed Saudi companies
• Saudi Arabia tightens market rules in bid to revive IPOs
• Saudi Arabia replaces head of capital markets regulator 

The All-Shares Index, which tracks the main market, has fallen by 9 percent over the past 12 months. According to Al-Sudairi, 90 percent of listed stocks on the Saudi Exchange were down in the month of December.

Among the most significant reforms proposed are regulations to tighten valuation requirements for new IPOs.

Last year book-building processes were often over-subscribed, sometimes by more than 100 times.

Most of those oversubscriptions, Al-Sudairi said, “did not reflect true demand”.