RIYADH: Saudi Arabia’s markets regulator is being urged to rethink its push to give local retail investors a larger share of initial public offerings (IPOs), amid concerns the effort risks further weakening listing performance.
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.
They said it pushes too much stock towards individuals during a period of weak demand, according to people familiar with the matter.
Bankers have also complained that the guidance squeezes allocations for foreign institutional investors, running counter to recent reforms aimed at attracting more overseas capital into Saudi equities, said the people, who asked not to be identified discussing private information.
While there has been no formal rule change, the regulator began to indicate late last year that issuers should increase retail allocations, from about 10% to 20% previously, in order to win approval to list, according to some of the people.
“A group of banks, including some of the kingdom’s largest equity capital markets advisers, is now planning to lodge a written complaint to the regulator,” some of the people said.
The CMA did not respond to an official request for comment.
The pressure on the regulator comes as Saudi Arabia’s IPO market has shown signs of stalling.
While still historically elevated, listing volumes stagnated at US$4.2bil last year as concerns over valuations, oil prices and geopolitics weighed on market performance and deal flow.
EFSIM Facilities Management was one company that scrapped plans to list in late 2025, in part due to weaker market demand, Bloomberg News reported.
Companies that did go public have often struggled in early trading.
Only two of the 10 largest listings last year are trading above their offer price, according to data compiled by Bloomberg.
Retail demand for several firms, including Alramz Real Estate Co and Consolidated Grunenfelder Saady Holding Co, has specifically been lacklustre.
Saudi retail traders have also become less active.
The monthly value traded by local individuals fell to about US$9bil in December, the lowest level since at least 2020, according to data from exchange operator Saudi Tadawul Group compiled by Bloomberg.
Part of the decline may be down to the performance of the Tadawul All Share Index, which had its worst year in a decade in 2025.
While the benchmark has since rebounded, it continues to lag emerging market peers.
Bankers said the market backdrop makes it difficult to meet the CMA’s guidance on larger retail allocations, according to some of the people.
They have also raised concerns that retail investors tend to sell shortly after listings, contributing to weak post-IPO performance.
Banks have voiced similar concerns about the CMA’s guidance to allocate a significant portion, as much as 30%, of IPO shares to mutual funds, which have also shown limited appetite for recent offerings, according to some of the people.
The short-term IPO pipeline in Saudi Arabia includes large deals such as contractor Mutlaq AlGhowairi Contracting, which could be valued at between 12 billion (US$3.2bil) and 15 billion riyals. — Bloomberg
