Saudi Arabia's Capital Market Authority has published draft rules that would require underwriters to buy any unsold shares in an initial public offering, even where doing so leaves the issuer unable to meet listing requirements.
The regulator put the draft regulatory provisions out for public consultation on 22 September 2026, with the consultation period closing on 22 October 2026.
Three changes sit at the centre of the proposal. Underwriting agreements would have to be executed before book-building begins, rather than finalised once demand is known. Participants in the book-build would need verified liquidity, and the only acceptable verification would be cash or cash equivalents. And if an underwriter's resulting ownership caused the issuer to fail a listing requirement, the underwriter would still be obliged to purchase all the offered shares, with the shares then not listed.
The draft also introduces a disclosure obligation. Issuers would be required to publish forward-looking statements and forecasts covering at least one year ahead, and financial advisers would have to carry out professional due diligence on those forecasts. The regulator said the provisions would enhance the efficiency of the IPO framework by requiring the financial adviser to exercise the necessary professional diligence in relation to the issuer's forward-looking statements.
The context is a sharp slowdown in regional issuance. Equity issuance across the Middle East and Africa totalled 2.1 billion dollars in the first half of 2026, down 71 per cent year on year and the lowest first-half figure since 2020, and at least one Saudi listing was cancelled outright during the period.
What the regulator is proposing is, in effect, a transfer of pricing risk from investors to banks. Firm underwriting struck before the book opens removes the underwriter's ability to reprice as demand is discovered, and the obligation to take the whole book even when the outcome is an unlistable company removes the usual escape route. Cash-verified orders attack the other half of the problem, which is book-building demand that evaporates at allocation.
The predictable consequences are higher gross spreads and a shorter list of banks willing to lead Saudi deals. An underwriter asked to carry genuine residual risk will price for it, and smaller houses may conclude they cannot carry it at all. That is not necessarily a failure of the policy. A market where fewer, better capitalised banks bring fewer, better priced deals may be exactly what the regulator wants after a year in which issuance collapsed and at least one deal was pulled.
For boards planning a Tadawul listing in 2027 there are two practical implications. The first is to assume a narrower field of willing underwriters and a longer negotiation over fees. The second is the forecast requirement: publishing a year of forward guidance that an adviser has diligenced is a materially higher standard of disclosure than most regional issuers have previously faced, and it creates a public benchmark against which the company will be judged in its first year as a listed business.
