On 2 November 2026, the Board of Saudi Arabia's Capital Market Authority (CMA) approved the regulatory provisions associated with its project to enhance initial public offering (IPO) practices, effective from the date of publication. The provisions follow a draft published for public consultation on 22 September 2026, which ran for 30 days to 22 October. The final text keeps the three pillars of the draft, covering underwriting, book-building orders and forward-looking disclosure, and adds detail in several places: a mechanism for an underwriter to dispose of shares it is left holding if a listing cannot proceed, a longer and more precisely defined forecast period, and an explicit requirement to disclose the methodology, assumptions and risks behind the forecasts.
A Main Market IPO in the Kingdom runs in two stages. In the first, the book-building stage, the financial advisor and the institutions working with it collect participation orders from institutional investors, known as participating entities, across a price range. The book sets the final offer price and the institutional allocation. In the second stage, individual investors subscribe at that price through the receiving entities. Until now, the Instructions on Book Building and Allocation of Shares in IPOs have required the underwriting agreement to be signed before the subscription begins, which in practice meant after the book had closed and the price was known. The underwriter committed to a deal whose demand and price had already been established.
The provisions arrive at a quiet moment for Saudi issuance. Three companies listed on the Main Market and Nomu in the first eight months of 2026, raising about SAR 523 million, against 29 listings raising SAR 13.3 billion in the same period of 2025, according to Argaam. Regional uncertainty, higher funding costs and a gap between the valuations sought by owners and those offered by investors have all played a part. At the same time, offerings have continued to attract institutional books many times the size of the deal. The CMA has framed the new provisions around the quality of that demand and of the information behind it: more efficient verification, underwriting, book-building and pricing, greater transparency, and investment decisions based on clear and complete information. A pause in issuance is a practical moment to reset the process before the pipeline reopens.
Why this matters
1. The underwriter now carries demand risk from the outset
Under the previous sequence, the underwriter signed once the book had shown where demand lay, and its commitment served mainly as a backstop against a shortfall in the individual subscription or a failure by allocated investors to pay. From today, the commitment runs from the moment the book opens, before any investor has been tested on price. If the book is weak, the underwriter must take up what investors do not. If the shortfall is so large that the underwriter's own holding would breach the free-float or shareholder-spread requirements of the Listing Rules, the listing does not proceed at all and the underwriter still buys the entire offering. The disposal mechanism permitted by the final provisions gives the parties a contractual route for what happens to those shares afterwards.
The practical consequence is that underwriting becomes a balance-sheet decision taken earlier in the process. Article 95 of the Prudential Rules requires an underwriter to notify the CMA in writing before it signs an irrevocable underwriting agreement, describing how the commitment will affect its capital adequacy ratio and confirming that the ratio will remain above the required minimum. That notification, and the capital calculation behind it, now moves to the start of the book-build. Under Article 93, an underwriter may reduce its net underwriting position only for portions sub-underwritten or subscribed by third parties under written agreements that are irrevocable and unconditional; orders in an open book, which can still be amended or cancelled, do not qualify. Underwriters can be expected to set price ranges with greater care, to put syndicate and sub-underwriting arrangements in place before launch, and to commit to transactions they are confident can be placed. For investors, a signed underwriting agreement at launch is a clear signal that a regulated institution stands behind the offering.
2. Orders must be backed by money that is available
Book-building works only when the book is a reliable record of demand. Where an investor can support an order with credit facilities or with assets it cannot realise in time, it has an incentive to bid for more than it intends to hold, expecting to be scaled back. The book then appears deeper than it is, and the oversubscription multiple becomes a less useful guide to how the shares will trade. The new provisions address this directly. Orders must reflect the investor's actual available liquidity, and only cash or cash equivalents may be accepted as evidence of capacity. The consultation text gave, as an example of cash equivalents, securities that can be converted into cash within the subscription payment period, and the FAQs are expected to confirm the final treatment.
Orders are binding for payment by the subscription deadline, and the consultation text also confirmed that an order at a given price covers every lower price in the range, so that demand remains in the book as the price is set. Headline oversubscription figures are likely to be lower as a result. That should be read in context: a book that is several times covered by funded orders gives the issuer, investors and the wider market a clearer signal of demand than a much larger multiple built on orders that would not have been paid in full.
3. Forecasts move into the prospectus
Saudi prospectuses have been largely historical documents. The minimum content for a Main Market share prospectus, set out in Annex 12 of the Rules on the Offer of Securities and Continuing Obligations, centres on three years of audited financial information and the latest interim period, together with management's discussion and analysis of that history. The principal forward-looking statement required has been the directors' declaration that working capital is sufficient for the twelve months after publication. Investors and analysts have formed their own view of the future, drawing on research and management presentations that sat outside the prospectus.
The new provisions bring the issuer's own expectations into the regulated offering document. Forecasts must cover the rest of the latest financial period in the prospectus and at least the following financial year. For a prospectus that includes half-year accounts, that amounts to a forward view of around eighteen months. The forecasts must rest on reasonable and measurable grounds and come with their methodology, material assumptions and key risks. Because the requirement extends to the registration document, which is used for direct listings on the Parallel Market, it reaches Nomu as well as the Main Market. Once in the offering document, forecasts are subject to the same liability framework under the Capital Market Law as every other statement in it, and a material change before listing may require a supplementary prospectus.
4. The financial advisor's opinion now extends to the forecasts
The financial advisor has always been required to satisfy itself, through due diligence and enquiry, that an issuer meets the conditions for registration and offer, and to confirm to the CMA that it has reached a reasonable opinion on the application. The new provisions direct that standard specifically at the forecasts: the advisor must exercise the professional due diligence needed to reach a reasonable opinion on them. In practice, this is likely to mean deeper work on the issuer's business plan and budgeting process, documented challenge of the key assumptions and, in many cases, agreed procedures by reporting accountants on how the forecasts have been compiled. The financial advisor becomes the first independent test of the issuer's expectations before investors rely on them.
How does this compare internationally?
Each element of the Saudi package has a counterpart in other markets, but the combination is distinctive.
In the United States and the United Kingdom, the underwriting agreement is normally signed at pricing, after the book has closed, so that the banks' firm commitment covers the short window between pricing and settlement. The Saudi provisions place the commitment at the opening of the book. That gives the issuer and investors certainty from the start of the process and places a greater share of the demand risk with the underwriter.
On the quality of orders, the closest precedent is Hong Kong. Since 5 August 2022, paragraph 21 of the Securities and Futures Commission's Code of Conduct has made capital market intermediaries responsible for the transparency of the book, prohibited them from placing orders they know to be inflated, and required disclosure of the investors behind orders placed on an omnibus basis. The Saudi provisions take a further step by specifying the evidence of financial capacity that may be accepted.
On forecasts, practice in most major markets is permissive rather than mandatory. In the United States, projections rarely appear in IPO prospectuses, in part because the statutory safe harbours for forward-looking statements do not extend to IPOs. In the United Kingdom, the Public Offers and Admissions to Trading Regulations, in force since 19 January 2026, encourage issuers to include forward-looking information by applying a liability standard based on recklessness or dishonesty to qualifying protected forward-looking statements, but they do not require such statements. Saudi Arabia has made forecasts a minimum disclosure for every IPO and attached a specific due diligence duty to them.
The Saudi approach also sits within a wider regional effort to strengthen the IPO process. In the United Arab Emirates, the new Capital Markets Law in force since 1 January 2026 places prospectus liability on boards, executive management and advisers and gives a legal footing to price stabilisation. In Oman, banks are required to move their capital market activity into separately licensed units. Each market is addressing the reliability of its IPO process from a different angle.
What it means for market makers and the secondary market
For a market maker, the quality of an IPO is measured after the first day of trading. A newly listed share trades well when its shareholders are investors who wanted to own it at the offer price, when that price was set by genuine demand, and when there is a shared basis for valuing the company. Each of the three pillars bears on these conditions.
Allocations built on funded orders should place shares with investors who intend to hold them, rather than with participants who bid large to secure a small allocation. That is likely to support more balanced two-way flow in the early sessions and less one-directional selling into a thin order book. Published forecasts give liquidity providers, analysts and investors a common reference point for fair value, and the earnings calls the CMA has proposed for Main Market companies would provide a regular occasion to test performance against it. Both make quoting a newly listed company a better-informed exercise.
There is a second consideration. Because the underwriter's commitment now runs from the opening of the book, there will be offerings in which the underwriter holds part of the shares at listing. How and when those shares return to the market will matter for liquidity and price formation in the stock's first months. Clear disclosure of the underwriter's position and an orderly approach to any subsequent sale will help market makers and investors price that supply with confidence.
For exchange traded funds and index funds, the effect is indirect but real. Newly listed companies in time enter the indices that these funds track, and ETF market makers hedge their quotes with the underlying shares. More orderly price formation in new listings makes those constituents easier to trade and hedge, which supports tighter spreads in the funds that hold them. These are the expected effects of the new design, and they will become visible as the IPO pipeline reopens.
What market participants should be thinking about
The provisions are in force. Any offering whose book-build has not yet opened will need to be structured around them, and transactions already under way should confirm their position with the CMA. Market participants should be looking at the following.
• Underwriters: capital planning and the Prudential Rules notification at the start of the book-build, syndicate and sub-underwriting arrangements in place before launch, the pricing and settlement mechanics of the commitment, and the terms of any disposal mechanism for a listing that cannot proceed.
• Financial advisors and institutions receiving orders: written procedures to verify each participating entity's available cash or cash equivalents, a defined standard of evidence, realistic timing for international investors who need to convert currency or transfer funds, and records showing how each order was verified.
• Issuers: a forecast process owned by the board, with documented assumptions and sensitivities, consistency between the prospectus, any international offering document and management presentations, and monitoring of the forecasts up to listing.
• Financial advisors as diligence providers: a due diligence scope that covers the forecasts, a clear division of work with reporting accountants, and engagement terms that reflect the extended responsibility.
• Institutional investors: order sizes matched to funds that will be available on the payment date, and internal approvals that reflect the binding nature of orders.
• Issuers in the pipeline: a review of the timetable, documentation and advisor arrangements against the new provisions, and early engagement with the CMA on any transitional questions.
A firmer foundation for Saudi IPOs
The provisions do not change who may list or on what terms. They change the discipline with which an offering is underwritten, bid for and described. Underwriters will carry their commitment from the start, investors will bid with funds they have, and issuers will set out what they expect, with a financial advisor standing behind that disclosure. For a market that aims to attract issuers and international investors on a sustained basis, committed underwriting, funded demand and forward-looking disclosure together form a strong foundation.
Several practical points are expected to be addressed in the FAQs the CMA has said it will publish, including the price at which the underwriter's commitment is fixed when the book opens, the treatment of offerings already in progress on 2 November, the forms the disposal mechanism may take, and the application of the order requirements across the Main Market and the Parallel Market. Participants should read the FAQs alongside the final provisions before launching any transaction. The direction is clear: the Saudi book-building process is now designed to reflect demand that is committed, funded and informed.
