Saudi CMA requires underwriters to buy the full IPO offer
Saudi Arabia's CMA approved rules requiring the underwriter to buy all offered shares once book-building starts, effective from publication.
The board of the Saudi Capital Market Authority approved regulatory provisions to enhance initial public offering practices, effective from the date of publication, as part of the regulator's efforts to develop the capital market, reduce risks linked to securities trading and regulate the activities of entities under its supervision.
The provisions strengthen the role and responsibility of the underwriter in the offering process by requiring the underwriting agreement to be executed and become effective before book-building begins, with the obligation to purchase all offered shares taking effect when book-building starts.
If the underwriter's ownership of the offered shares results in a failure to meet the listing requirements under the listing rules, the issuer's shares will not be listed and the underwriter must buy all offered shares. The underwriting agreement may include a mechanism for disposing of those shares.
The rules require additional procedures for participation orders submitted during book-building, including verifying that orders reflect the actual value of liquidity available to the investor, limiting acceptable means of verifying the financial capacity of participating entities to cash or cash equivalents, and ensuring orders become binding for payment no later than the deadline for paying the subscription amount under the timetable in the prospectus. They also require the financial adviser to exercise the necessary professional due diligence on forward-looking statements and performance forecasts. The CMA published the draft provisions on 22 September 2026 for a 30-day public consultation.
What do these terms mean?
Underwriter: The financial institution that markets an offering and allocates shares to investors, and under these rules bears the obligation to buy any shares left unsold.
Book-building: The stage in which an offering collects investor orders and uses them to set the share price and allocation.
Listing requirements: The conditions a company must meet for its shares to be admitted to trading on a stock market.
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