CMA urges companies to boost retail investor allocations in IPOs: Report

CMA seeks to boost market liquidity

Saudi Arabia’s Capital Market Authority (CMA) encouraged companies planning to list on Tadawul to allocate a larger portion of their shares to retail investors in upcoming initial public offerings (IPOs), Semafor reported, citing sources.

The CMA has informally requested several firms preparing for listings in the coming months to allocate around 30% of offered shares to individual investors, as part of efforts to boost market liquidity.

Data compiled by Argaam showed that the Instructions for book building process and allocation method in IPOs stipulate that the proportion of shares reserved for retail investors is determined in the prospectus, while allocation for participating institutions is set by the financial advisor in coordination with the issuer.

Some recent Saudi IPOs have already seen higher retail allocations than the typical 10%, reaching 20% in the latest offerings, 30% in IPOs such as Elm Co. and Saudi Tadawul Group (STG), 40% in Alandalus Property Co., and 50% in Electrical Industries Co.

CMA Chairman Mohammed ElKuwaiz previously stated that the allocation ratio between institutional and retail investors is not fixed, but varies depending on the nature of the offering, pricing efficiency, and trading performance.