Tadawul trading screen
Saudi Arabia’s Capital Market Authority (CMA) has approved regulatory provisions under its initiative to improve IPO practices, strengthening underwriters’ responsibilities, tightening investor financial solvency verification requirements during book-building, and requiring companies to disclose forward-looking financial projections. 
The approval comes amid a notable slowdown in Saudi Arabia’s IPO market, with the number of listings on the Main and Nomu markets falling to just three in the first eight months of 2026, from 29 in the same period last year, a decline of nearly 90%, according to an earlier Argaamsurvey.
Against this backdrop, Argaam surveyed executives at financial firms specializing in IPOs to assess the key changes introduced by the new regulations, their implications for issuers, financial advisors and underwriters, and potential implementation challenges.
Participants agreed that the amendments would strengthen discipline in the IPO process and improve the quality of financial disclosures. However, they differed on their potential impact on IPO costs, company valuations and financial institutions’ appetite for underwriting, as well as the associated risks and liabilities.
Failed listings: new mechanisms to mitigate underwriters’ risks
Omar Al Kathiri, Head of Investment Banking at Value Capital, described allowing underwriting agreements to include mechanisms for disposing of shares in the event of a failed listing as one of the circular’s most significant provisions.
He said the addition turns a failed listing from an uncertain scenario into one governed by pre-agreed arrangements, allowing all parties to understand their rights and obligations before the IPO begins, reducing the likelihood of disputes among the issuer, selling shareholders and underwriter.
Omar Al Kathiri, Head of Investment Banking at Value Capital
Mohamed Al-Sayyed, Chairman and CEO of Amwal Financial, said underwriting requirements apply exclusively to equity offerings on the Main Market and do not extend to IPOs on the parallel market (Nomu), private placements or debt offerings.
Mohamed Al-Sayyed, Chairman and CEO of Amwal Financial
Under the new regulatory provisions, which took effect on Nov. 2, underwriting agreements must be signed and become effective before book-building begins, with the underwriter’s commitment to purchase all offered shares becoming binding from that point, even if acquiring the shares results in a breach of listing requirements and prevents the company from listing.
Al-Sayyed expects the provisions to give issuers greater certainty that the offering will be completed and all shares sold. However, they will also require greater scrutiny, more conservative pricing and more detailed contractual terms with financial advisors and underwriters.
The provisions are also expected to make book-building more reflective of actual available liquidity, while curbing inflated or unfunded orders.
In turn, underwriters will face additional liquidity and capital adequacy risks, potentially extending to ownership of unlisted shares, making it essential to establish mechanisms for disposing of such shares.
Options include selling them to a strategic partner outside the capital market, setting up a fund to hold them, reselling them to the issuer’s shareholders, or launching another offering under different timing and pricing arrangements.
Meanwhile, Ghassan AlThukair, CEO of Miyar Capital, said the provision addresses one of the key risks facing underwriters: having capital tied up while bearing the risk of holding unlisted shares, noting that an underwriting commitment could effectively become an investment decision if a listing fails.
Ghassan AlThukair, CEO of Miyar Capital
He said the amendment’s significance lies not simply in allowing shares to be sold, but in establishing a clear exit mechanism in advance, enabling financial institutions to assess risks, evaluate underwriting transactions and price them more effectively.
Potential exit mechanisms include selling shares to qualified or strategic investors, redistributing them through a private placement, or gradually selling them under clear controls. Another option is to enter into prior agreements with other parties to purchase the shares if the listing fails, provided such arrangements comply with regulatory requirements.
AlThukair stressed the importance of defining these mechanisms when the underwriting agreement is signed, rather than addressing exit risks after a problem arises.
Will underwriting fees rise and financial institutions’ appetite wane?
Al Kathiri said the impact of the amendments should be assessed holistically. Making the underwriter’s commitment effective from the start of book-building extends its period of risk exposure. However, the share disposal mechanism mitigates the remaining risks and reduces the likelihood of being left holding shares in an unlisted company without a clear exit route.
Book-building controls also reduce underwriters’ actual risk by requiring investor orders to reflect available liquidity, limiting solvency verification to cash and cash equivalents, and treating orders placed at a specific price as covering all lower price levels. Orders must also be supported by the investor’s ability to pay.
These controls curb inflated demand and make book-building results a more accurate indicator of the market’s capacity to absorb an offering, he added.
Al Kathiri expects limited repricing of underwriting fees in some offerings, reflecting the extended commitment period and greater capital burden under capital adequacy rules. However, clear disposal mechanisms and more disciplined demand should limit this impact, making pricing more closely tied to each offering’s quality and strength.
He also expects well-capitalized financial institutions to maintain their appetite for underwriting, alongside greater reliance on underwriting syndicates and more disciplined pricing ranges, ultimately benefiting both issuers and investors.
Al-Sayyed, however, expects the new requirements to increase underwriters’ risk exposure, potentially dampening licensed capital market institutions’ appetite, particularly among foreign firms, for participating in IPO underwriting and prompting them to become more selective.
He added that the requirements will compel underwriters to conduct additional analysis and due diligence on issuing companies and market conditions, pushing up underwriting costs, fees and charges.
From another perspective, AlThukair expects the share disposal mechanism in the event of a failed listing to mitigate some financial risks, but not eliminate them entirely. Underwriters will remain obligated to purchase all offered shares, which could subsequently lose value, prove difficult to liquidate or require an extended holding period.
However, ownership of these shares could also generate investment returns, he noted.
A clearly defined exit mechanism reduces uncertainty and enables financial institutions to assess their risk exposure and determine the required capital allocation, potentially lowering risk premiums and underwriting costs for issuers, depending on the mechanism’s effectiveness, actual demand for the shares and the underwriter’s investment decision.
He expects the amendment to encourage more institutions to participate in underwriting, particularly those previously reluctant to take part in certain offerings because of the risk of a failed listing.
Al-Thukair stressed the need to balance stronger underwriter responsibilities with practical risk management tools, particularly as making underwriting commitments binding from the start of book-building increases underwriters’ risk exposure.
Such a balance would help preserve competition in the underwriting market and prevent the activity from becoming concentrated among a limited number of financial institutions.
IPO financial forecasts: longer periods and broader disclosure requirements
AlThukair said the final version of the financial forecast disclosure requirements is more closely aligned with companies’ financial and operational realities than the original proposal. While the initial draft set a minimum forecast period of one fiscal year, the approved provisions link the period to the time remaining after the latest financial period covered in the prospectus or registration document, plus at least the following fiscal year.
He explained that this amendment ties the forecast period to the date of the latest financial information available to investors, rather than imposing a uniform period on all companies, thereby enhancing transparency and disclosure.
Some companies may consequently be required to disclose forecasts covering more than one year. For example, a company whose prospectus includes first-half financial statements will need to provide forecasts for the remainder of that year, in addition to the full following fiscal year.
AlThukair described the approach as positive, particularly when valuing companies whose growth prospects are a key business driver, but stressed the importance of accounting for each company’s business model and operating cycles, especially in sectors exposed to commodity prices, economic cycles, long-term contracts and projects, given differences in their ability to forecast financial performance.
Al-Sayyed said the minimum forecast disclosure period is one full fiscal year if the IPO application includes financial statements for a completed year. If the application is based on reviewed financial statements covering less than a full year, the forecast period extends beyond one year to cover the remainder of that fiscal year and the following year.
Al Kathiri said linking the forecast period to the latest financial period included in the prospectus makes the requirements more suitable for each IPO’s timing while ensuring investors receive forward-looking financial information covering at least the following fiscal year.
For a company with a Dec. 31 fiscal year-end, the forecast period could extend to around 21 months if the latest financial period included in the prospectus ends on March 31, or around 18 months if it ends on June 30, while the period would be 12 months if the latest financial information covers a full fiscal year.
He added that the requirements will push companies to develop more robust financial models and carefully plan IPO timing in coordination with their financial reporting schedules.
Financial forecasts for listed companies: A transparency tool or a source of legal liability?
Commenting on the legal implications of the new amendments, Al-Sayyed highlighted the importance of considering potential liabilities associated with disclosing forward-looking financial forecasts.
He explained that the regulations make such forecasts a mandatory part of the disclosures required in prospectuses and documents made available for review, rather than leaving them as an optional marketing tool, as is the case in some global financial markets, including the US, Canada and Hong Kong.
The requirements aim to improve IPO quality and strengthen investor confidence. However, they could also increase offering costs and the time companies need to prepare for listing, while exposing issuers and financial advisors to greater liability risks.
These challenges are particularly relevant for companies with seasonal revenues, consumer products not covered by long-term supply contracts, or inadequate financial planning practices.
Al-Sayyed expects the new requirements to push financial advisors toward more conservative valuations and IPO price ranges when forecasts are highly sensitive or rely on assumptions and inputs with low levels of reliability.
This could help narrow the gap between actual and projected performance, while improving financial planning practices and pricing quality. However, it will also increase the burden and costs on issuers and financial advisors, particularly startups and businesses whose future performance is difficult to predict due to market conditions.
He said the main risks stem from potential legal liability if forecasts are not achieved, noting that the published regulations do not explicitly exempt forward-looking financial forecasts from the legal obligations governing prospectus disclosures.
Article 55 of the Capital Market Law allows claims for compensation if a prospectus contains incorrect statements about a material matter or omits material facts. Al-Sayyed said this raises questions about whether discrepancies between actual results and forward-looking forecasts could fall within the scope of these provisions, even though forecasts are inherently estimates and cannot be guaranteed to be as accurate as historical financial statements.
Al-Sayyed believes these changes will affect IPO momentum and investor appetite, as well as the costs of offerings and listings on both the Main and Nomu markets.
AlKathiri, meanwhile, expects the disclosure of documented financial forecasts to narrow the information gap between issuers and investors, potentially supporting more attractive company valuations. Investors will be able to assess IPO pricing based on disclosed figures for which the company assumes responsibility.
He explained that the amendments increase financial advisors’ professional accountability by requiring them to exercise due professional care when assessing forecasts, including reviewing and documenting key assumptions and financial modeling methodologies, conducting sensitivity analyses under different scenarios, and ensuring forecasts are consistent with the company’s historical performance and sector conditions.
He said these requirements will raise professional standards and distinguish advisors with strong modeling and valuation expertise, while increasing costs associated with preparing and reviewing forecasts, advisory services and the time required from company management, although these costs are expected to remain limited relative to the size of the offering and be offset by improvements in pricing quality and post-listing share price stability.
Regarding the risk of forecasts not materializing, AlKathiri said the potential consequences include an impact on share prices and corporate reputation, as well as possible regulatory and contractual liability if forecasts are found to have been based on unreasonable assumptions.
He stressed the importance of ensuring forecasts are clear and not misleading, with transparent disclosure of the methodologies, assumptions and risks that could cause actual results to differ, while requiring companies to continue reporting any material deviations after listing. He added that conservative and measurable forecasts serve issuers’ interests as much as, if not more than, those of investors.
AlThukair, for his part, expects the amendment to significantly change how IPO candidates are valued by placing greater emphasis on expected future performance alongside historical results and comparisons with peer companies.
He explained that the new disclosures will help investors assess companies’ ability to achieve targeted growth, improve profit margins and cash flows, and sustain earnings. This should improve pricing quality and reduce reliance on growth assumptions unsupported by sufficient operational and financial indicators.
He added that financial advisors’ responsibilities will extend beyond preparing prospectuses and presenting company-provided information to reviewing forecasts and their underlying assumptions, verifying their reasonableness and consistency with financial performance and operational and financing plans, and assessing their achievability based on companies’ current and projected capabilities.
AlThukair expects offering costs to rise, particularly for companies lacking advanced financial planning systems and forecasting models, due to the need to develop financial models, conduct sensitivity analyses and scenario assessments, and expand due diligence and verification procedures.
He stressed the need to distinguish between normal deviations from forecasts resulting from changing economic and market conditions and forecasts based on unreasonable assumptions or containing misleading information. While forecasts are inherently estimates and cannot be fully guaranteed, they should be based on clear, logical and measurable assumptions, with relevant risks duly disclosed.
He said the amendment’s most significant impact will be to strengthen discipline in company valuations ahead of IPOs, reinforce the responsibilities of all parties involved, and improve investors’ ability to make decisions based on a clearer forward-looking picture.
AlThukair stressed that financial forecasts should not become overly optimistic figures used to justify high IPO valuations. Instead, they should serve as a practical tool to help investors understand and assess companies and monitor their performance after listing.
Tadawul trading screen
Saudi Arabia’s Capital Market Authority (CMA) has approved regulatory provisions under its initiative to improve IPO practices, strengthening underwriters’ responsibilities, tightening investor financial solvency verification requirements during book-building, and requiring companies to disclose forward-looking financial projections.
The approval comes amid a notable slowdown in Saudi Arabia’s IPO market, with the number of listings on the Main and Nomu markets falling to just three in the first eight months of 2026, from 29 in the same period last year, a decline of nearly 90%, according to an earlier Argaamsurvey.
Against this backdrop, Argaam surveyed executives at financial firms specializing in IPOs to assess the key changes introduced by the new regulations, their implications for issuers, financial advisors and underwriters, and potential implementation challenges.
Participants agreed that the amendments would strengthen discipline in the IPO process and improve the quality of financial disclosures. However, they differed on their potential impact on IPO costs, company valuations and financial institutions’ appetite for underwriting, as well as the associated risks and liabilities.
Failed listings: new mechanisms to mitigate underwriters’ risks
Omar Al Kathiri, Head of Investment Banking at Value Capital, described allowing underwriting agreements to include mechanisms for disposing of shares in the event of a failed listing as one of the circular’s most significant provisions.
He said the addition turns a failed listing from an uncertain scenario into one governed by pre-agreed arrangements, allowing all parties to understand their rights and obligations before the IPO begins, reducing the likelihood of disputes among the issuer, selling shareholders and underwriter.
Omar Al Kathiri, Head of Investment Banking at Value Capital
Mohamed Al-Sayyed, Chairman and CEO of Amwal Financial, said underwriting requirements apply exclusively to equity offerings on the Main Market and do not extend to IPOs on the parallel market (Nomu), private placements or debt offerings.
Mohamed Al-Sayyed, Chairman and CEO of Amwal Financial
Under the new regulatory provisions, which took effect on Nov. 2, underwriting agreements must be signed and become effective before book-building begins, with the underwriter’s commitment to purchase all offered shares becoming binding from that point, even if acquiring the shares results in a breach of listing requirements and prevents the company from listing.
Al-Sayyed expects the provisions to give issuers greater certainty that the offering will be completed and all shares sold. However, they will also require greater scrutiny, more conservative pricing and more detailed contractual terms with financial advisors and underwriters.
The provisions are also expected to make book-building more reflective of actual available liquidity, while curbing inflated or unfunded orders.
In turn, underwriters will face additional liquidity and capital adequacy risks, potentially extending to ownership of unlisted shares, making it essential to establish mechanisms for disposing of such shares.
Options include selling them to a strategic partner outside the capital market, setting up a fund to hold them, reselling them to the issuer’s shareholders, or launching another offering under different timing and pricing arrangements.
Meanwhile, Ghassan AlThukair, CEO of Miyar Capital, said the provision addresses one of the key risks facing underwriters: having capital tied up while bearing the risk of holding unlisted shares, noting that an underwriting commitment could effectively become an investment decision if a listing fails.
Ghassan AlThukair, CEO of Miyar Capital
He said the amendment’s significance lies not simply in allowing shares to be sold, but in establishing a clear exit mechanism in advance, enabling financial institutions to assess risks, evaluate underwriting transactions and price them more effectively.
Potential exit mechanisms include selling shares to qualified or strategic investors, redistributing them through a private placement, or gradually selling them under clear controls. Another option is to enter into prior agreements with other parties to purchase the shares if the listing fails, provided such arrangements comply with regulatory requirements.
AlThukair stressed the importance of defining these mechanisms when the underwriting agreement is signed, rather than addressing exit risks after a problem arises.
Will underwriting fees rise and financial institutions’ appetite wane?
Al Kathiri said the impact of the amendments should be assessed holistically. Making the underwriter’s commitment effective from the start of book-building extends its period of risk exposure. However, the share disposal mechanism mitigates the remaining risks and reduces the likelihood of being left holding shares in an unlisted company without a clear exit route.
Book-building controls also reduce underwriters’ actual risk by requiring investor orders to reflect available liquidity, limiting solvency verification to cash and cash equivalents, and treating orders placed at a specific price as covering all lower price levels. Orders must also be supported by the investor’s ability to pay.
These controls curb inflated demand and make book-building results a more accurate indicator of the market’s capacity to absorb an offering, he added.
Al Kathiri expects limited repricing of underwriting fees in some offerings, reflecting the extended commitment period and greater capital burden under capital adequacy rules. However, clear disposal mechanisms and more disciplined demand should limit this impact, making pricing more closely tied to each offering’s quality and strength.
He also expects well-capitalized financial institutions to maintain their appetite for underwriting, alongside greater reliance on underwriting syndicates and more disciplined pricing ranges, ultimately benefiting both issuers and investors.
Al-Sayyed, however, expects the new requirements to increase underwriters’ risk exposure, potentially dampening licensed capital market institutions’ appetite, particularly among foreign firms, for participating in IPO underwriting and prompting them to become more selective.
He added that the requirements will compel underwriters to conduct additional analysis and due diligence on issuing companies and market conditions, pushing up underwriting costs, fees and charges.
From another perspective, AlThukair expects the share disposal mechanism in the event of a failed listing to mitigate some financial risks, but not eliminate them entirely. Underwriters will remain obligated to purchase all offered shares, which could subsequently lose value, prove difficult to liquidate or require an extended holding period.
However, ownership of these shares could also generate investment returns, he noted.
A clearly defined exit mechanism reduces uncertainty and enables financial institutions to assess their risk exposure and determine the required capital allocation, potentially lowering risk premiums and underwriting costs for issuers, depending on the mechanism’s effectiveness, actual demand for the shares and the underwriter’s investment decision.
He expects the amendment to encourage more institutions to participate in underwriting, particularly those previously reluctant to take part in certain offerings because of the risk of a failed listing.
Al-Thukair stressed the need to balance stronger underwriter responsibilities with practical risk management tools, particularly as making underwriting commitments binding from the start of book-building increases underwriters’ risk exposure.
Such a balance would help preserve competition in the underwriting market and prevent the activity from becoming concentrated among a limited number of financial institutions.
IPO financial forecasts: longer periods and broader disclosure requirements
AlThukair said the final version of the financial forecast disclosure requirements is more closely aligned with companies’ financial and operational realities than the original proposal. While the initial draft set a minimum forecast period of one fiscal year, the approved provisions link the period to the time remaining after the latest financial period covered in the prospectus or registration document, plus at least the following fiscal year.
He explained that this amendment ties the forecast period to the date of the latest financial information available to investors, rather than imposing a uniform period on all companies, thereby enhancing transparency and disclosure.
Some companies may consequently be required to disclose forecasts covering more than one year. For example, a company whose prospectus includes first-half financial statements will need to provide forecasts for the remainder of that year, in addition to the full following fiscal year.
AlThukair described the approach as positive, particularly when valuing companies whose growth prospects are a key business driver, but stressed the importance of accounting for each company’s business model and operating cycles, especially in sectors exposed to commodity prices, economic cycles, long-term contracts and projects, given differences in their ability to forecast financial performance.
Al-Sayyed said the minimum forecast disclosure period is one full fiscal year if the IPO application includes financial statements for a completed year. If the application is based on reviewed financial statements covering less than a full year, the forecast period extends beyond one year to cover the remainder of that fiscal year and the following year.
Al Kathiri said linking the forecast period to the latest financial period included in the prospectus makes the requirements more suitable for each IPO’s timing while ensuring investors receive forward-looking financial information covering at least the following fiscal year.
For a company with a Dec. 31 fiscal year-end, the forecast period could extend to around 21 months if the latest financial period included in the prospectus ends on March 31, or around 18 months if it ends on June 30, while the period would be 12 months if the latest financial information covers a full fiscal year.
He added that the requirements will push companies to develop more robust financial models and carefully plan IPO timing in coordination with their financial reporting schedules.
Financial forecasts for listed companies: A transparency tool or a source of legal liability?
Commenting on the legal implications of the new amendments, Al-Sayyed highlighted the importance of considering potential liabilities associated with disclosing forward-looking financial forecasts.
He explained that the regulations make such forecasts a mandatory part of the disclosures required in prospectuses and documents made available for review, rather than leaving them as an optional marketing tool, as is the case in some global financial markets, including the US, Canada and Hong Kong.
The requirements aim to improve IPO quality and strengthen investor confidence. However, they could also increase offering costs and the time companies need to prepare for listing, while exposing issuers and financial advisors to greater liability risks.
These challenges are particularly relevant for companies with seasonal revenues, consumer products not covered by long-term supply contracts, or inadequate financial planning practices.
Al-Sayyed expects the new requirements to push financial advisors toward more conservative valuations and IPO price ranges when forecasts are highly sensitive or rely on assumptions and inputs with low levels of reliability.
This could help narrow the gap between actual and projected performance, while improving financial planning practices and pricing quality. However, it will also increase the burden and costs on issuers and financial advisors, particularly startups and businesses whose future performance is difficult to predict due to market conditions.
He said the main risks stem from potential legal liability if forecasts are not achieved, noting that the published regulations do not explicitly exempt forward-looking financial forecasts from the legal obligations governing prospectus disclosures.
Article 55 of the Capital Market Law allows claims for compensation if a prospectus contains incorrect statements about a material matter or omits material facts. Al-Sayyed said this raises questions about whether discrepancies between actual results and forward-looking forecasts could fall within the scope of these provisions, even though forecasts are inherently estimates and cannot be guaranteed to be as accurate as historical financial statements.
Al-Sayyed believes these changes will affect IPO momentum and investor appetite, as well as the costs of offerings and listings on both the Main and Nomu markets.
AlKathiri, meanwhile, expects the disclosure of documented financial forecasts to narrow the information gap between issuers and investors, potentially supporting more attractive company valuations. Investors will be able to assess IPO pricing based on disclosed figures for which the company assumes responsibility.
He explained that the amendments increase financial advisors’ professional accountability by requiring them to exercise due professional care when assessing forecasts, including reviewing and documenting key assumptions and financial modeling methodologies, conducting sensitivity analyses under different scenarios, and ensuring forecasts are consistent with the company’s historical performance and sector conditions.
He said these requirements will raise professional standards and distinguish advisors with strong modeling and valuation expertise, while increasing costs associated with preparing and reviewing forecasts, advisory services and the time required from company management, although these costs are expected to remain limited relative to the size of the offering and be offset by improvements in pricing quality and post-listing share price stability.
Regarding the risk of forecasts not materializing, AlKathiri said the potential consequences include an impact on share prices and corporate reputation, as well as possible regulatory and contractual liability if forecasts are found to have been based on unreasonable assumptions.
He stressed the importance of ensuring forecasts are clear and not misleading, with transparent disclosure of the methodologies, assumptions and risks that could cause actual results to differ, while requiring companies to continue reporting any material deviations after listing. He added that conservative and measurable forecasts serve issuers’ interests as much as, if not more than, those of investors.
AlThukair, for his part, expects the amendment to significantly change how IPO candidates are valued by placing greater emphasis on expected future performance alongside historical results and comparisons with peer companies.
He explained that the new disclosures will help investors assess companies’ ability to achieve targeted growth, improve profit margins and cash flows, and sustain earnings. This should improve pricing quality and reduce reliance on growth assumptions unsupported by sufficient operational and financial indicators.
He added that financial advisors’ responsibilities will extend beyond preparing prospectuses and presenting company-provided information to reviewing forecasts and their underlying assumptions, verifying their reasonableness and consistency with financial performance and operational and financing plans, and assessing their achievability based on companies’ current and projected capabilities.
AlThukair expects offering costs to rise, particularly for companies lacking advanced financial planning systems and forecasting models, due to the need to develop financial models, conduct sensitivity analyses and scenario assessments, and expand due diligence and verification procedures.
He stressed the need to distinguish between normal deviations from forecasts resulting from changing economic and market conditions and forecasts based on unreasonable assumptions or containing misleading information. While forecasts are inherently estimates and cannot be fully guaranteed, they should be based on clear, logical and measurable assumptions, with relevant risks duly disclosed.
He said the amendment’s most significant impact will be to strengthen discipline in company valuations ahead of IPOs, reinforce the responsibilities of all parties involved, and improve investors’ ability to make decisions based on a clearer forward-looking picture.
AlThukair stressed that financial forecasts should not become overly optimistic figures used to justify high IPO valuations. Instead, they should serve as a practical tool to help investors understand and assess companies and monitor their performance after listing.
