As many as 54 Listing Requests Received -CMA Chair Announces

Market maker’s primary responsibility is to provide the market with liquidity, rather than defending a drop or backing up a rising, the Chairman of the Capital Market Authority (CMA), Muhammad Al-Quwaiz, highlighted.

 Capital increases in listed firms amounted to roughly SR500 million, in 2019, but it tremendously increased to about SR5-6 billion, in 2020, a 10-fold eye catching rise.

Saudi financial market is already greater, in volume, than the whole Saudi economy, so, if Saudi Aramco were included, the financial market would be four times the economy, he went on arguing.

As many as 54 companies have requested to go public and be listed on the Saudi stock exchange, 31 of which are for direct listing, as well as many small businesses preferring to go public and list on the parallel market “NOMU” due to the easier listing procedures, he elaborated.

Furthermore, with the establishment of direct listing, there has been a high demand for direct listing from businesses.

There are several reasons for concern, in the market, including institutional investors’ selling off of subscribed shares, in the event of a market decline, as well as the recurrence of some companies, adjusting their capital, he indicated, adding that measures are being taken to set additional requirements for these companies, setting forth that an increase shall require shareholder approval.

Capital increases for firms are a positive phenomenon and an extra source of funding that have helped the listed companies, in the financial market, as it is one of the factors that has contributed to their long-term viability.

Before transferring the experience to the general market, the authorities are presently analyzing the direct listing mechanism, for the possibility of introducing the modifications, it may require.

In response to the question of privatization in subscription for individuals and institutions, he stated that the percentage of subscriptions for individuals is established by the Regulations for Building Book of Orders, which were updated in 2018.

The goal of the amendment was to make the offering and listing process more efficient and simpler, and one of the changes made was to provide the company and financial advisors with more flexibility, in deciding which categories shall participate in the subscription and allocation rates.

The greater the volume of subscriptions, the greater the flexibility in the allocation process for institutions and individuals, indicating that, despite all of the benefits that the amendment provided, we were left with increased momentum on some observations, that we needed to address, as part of the periodic regulatory review.

After the recent vigor in momentum of subscriptions, the authorities are in the process of reviewing the list of instructions for building a book of orders, and it is possible that the list may be improved, as it will keep the parts that were useful as well as the areas in which we believe we can improve.

Allocation ratio for institutions and individuals can vary depending on the nature of the offering and from one subscription to another, as happened, during Saudi Tadawul Group’s subscription, and that shall be determined by the efficiency of offering pricing and trading, CMA chair emphasized to conclude.