Middle-east Arab News Opinion | Asharq Al-awsat

Capital Market Authority Controls Mechanism of Pricing IPO | ASHARQ AL-AWSAT English Archive 2005 -2017
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Alibaba Group Holding Ltd founder Jack Ma rings a ceremonial bell to start trading during his company’s initial public offering (IPO) under the ticker “BABA” at the New York Stock Exchange in New York September 19, 2014. REUTERS/Brendan McDermid

Riyadh- High issuance raises have become a main reason for Capital Market Authority (CMA) heading towards renewing instructions to allocate shares in the initial public offering and to build the order book.

CMA noted that its purpose is to reinforce the pricing mechanism and to enhance allocation standards through continuous pursuit to develop the Saudi capital market, to protect investors and to enhance organizational environment. CMA aims at urging individuals to participate in funds through their investments.

It added that the building of the order book is ongoing but the new instructions were set to organize the process, knowing that the best international practices were followed.

The instructions include a number of organizing restrictions for IPOs and share issuers to subscribing individuals. Among such instructions is that the whole amount of the offering must be covered by participating institutions, provided that public funds cover a specified percentage of the full IPO. This percentage varies based on the size of the public fund assets. Also, the price for IPO subscribing individuals must not exceed the highest price at which the whole offering was covered by participating institutions meeting the percentage set for public fund coverage. The allocation percentage for subscribing individuals should be specified in the prospectus.

Among the aspects stipulated by the issued instructions regarding the price range, the price extent (the difference between the lowest price and the highest price) must be at a percentage not exceeding (20%) of the minimum price. The participating institutions are entitled to submit requests at prices outside the price range up to a maximum not exceeding (20%) of the lowest and highest prices. After the approval of the underwriter and issuer, the financial adviser may change the price range only once.

In the same context, Tadawul held several workshops to introduce the new shares’ market, to be launched in 2017.