CMA faces calls to reconsider IPO localization push: Report

Saudi Arabia’s market regulator is facing calls to rethink its push to give local retail investors a larger share of initial public offerings, amid concerns the effort risks further weakening listing performance, Bloomberg reported, citing people familiar with the matter.

Several banks have been pressing the Capital Market Authority (CMA) to reconsider guidance encouraging issuers to allocate as much as 30% of shares in IPOs to retail investors, the agency said.

It added that banks see this as pushing too much stock toward individuals during a period of weak demand.

The sources also noted that a group of banks, including the Kingdom’s top capital market advisors, plan to submit a formal complaint to CMA.

According to Argaam’s data, the market regulator has not officially declared any changes in the individuals’ quota in subscriptions. However, press reports earlier reported that CMA encouraged companies planning to list on Tadawul to allocate a larger portion of their shares to retail investors in upcoming IPOs.

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.

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.