From IPO boom to standoff: Saudi Arabia’s capital markets ambitions meet a reluctant investor base
· Fortune
Saudi Arabia’s IPO market is currently grappling with its weakest performance in years.
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Just three companies—Dar Al Balad, Saleh Abdulaziz Al Rashed, and MSGA—have listed across Saudi Arabia’s Tadawul and its smaller parallel market Nomu so far this year, raising a combined $144 million.
In comparison, Saudi companies raised $3.7 billion through share sales last year—more than across the rest of the Gulf combined. Some $9.8 billion was raised across the 17 companies that listed in 2022.
The $144 million raised so far this year represents just 4% of the $3.53 billion raised through IPOs during the same eight-month period in 2025, when 25 companies went public, according to the Saudi Exchange 2025 Annual Report.
The reluctance to issue has, in large part, been driven by a pricing standoff between company owners and investors. Owners are reluctant to list at valuations the market is prepared to accept, while investors are unwilling to pay higher prices after a year of losses on most new listings.
Of the 17 companies that have gone public since 2025 on the kingdom’s main market, only four are trading above their issue price, Bloomberg data shows.
Three planned Saudi listings from Mutlaq Al Ghowairi, Arabian Dyar, and Kesay Clinics have all been postponed this year while the six-month extensions granted to Alandalus Educational and Alromansiah have since expired.
The ongoing U.S.-Iran war has added another layer of uncertainty, but the Saudi IPO market was already under pressure before the conflict began.
Aside from the compression in market valuations, liquidity has weakened and investors have become more selective as the cost of capital and risk premiums have increased.
The overall lacklustre performance has prompted Saudi’s market regulator, the Capital Market Authority (CMA), to propose a sweeping set of reforms in a bid to rejuvenate the Tadawul.
Most notably, the regulator is proposing that the underwriting commitment takes effect when book-building begins. This means that underwriters would be required to purchase any IPO shares that investors fail to subscribe for, potentially leaving them responsible for the entire offering.
The proposed overhaul follows reports last month that the CMA has been investigating the poor performance of recent IPOs, including earnings shortfalls after listing.
It has requested detailed information from both global and local investment banks on how IPOs were priced and allocated, with concerns that headline oversubscription has not always reflected genuine, immediately available investment capacity.
“I believe the proposed rules should increase accountability, improve disclosure, and strengthen price discovery,” says Osama Alowedi, founder and CEO of Riyadh-based asset management firm EQCM and former chief investment officer at SAB Invest, a subsidiary of Saudi Awwal Bank. which provides brokerage and investment banking services.
“This will help create greater discipline around valuation and help ensure that deals are priced more sensibly.”
By shifting more IPO execution and funding risk toward institutional investors and underwriters, some industry experts expect institutions, and particularly underwriters, to become more selective about the deals they participate in. The changes would leave them facing greater funding and execution risk from the book-building stage.
“It could mean fewer deals in the short term, particularly for smaller issuers or offerings priced aggressively against current market multiples,” Tahir Abbas, head of research at Oman-based Ubhar Capital, says.
“In my view, that would be a reasonable trade-off if it results in better-priced IPOs, stronger aftermarket performance and greater investor confidence. The objective should shift from maximizing the number of listings to building a more sustainable IPO market where the quality of demand matters as much as the size of the book.”
The reforms also require companies to disclose forward-looking statements, forecasts and financial performance indicators covering at least the following year, which should help create more sustainable demand after listing.
“In the absence of hard underwriting commitments and formal forward-looking expectations, accountability for both issuers and underwriters is relatively weak,” says Alowedi.
“Some recent IPOs came to market and their fundamental performance shortly after listing fell short of what had been informally indicated to institutional investors during the IPO process.”
The latest CMA proposals form part of its broader efforts to stimulate trading and strengthen the Tadawul’s performance.
In August, it revised its derivatives trading rules to attract more foreign investors and boost liquidity.
The revisions included cutting trading fees and enlisting a group of firms to act as market makers, ensuring investors can more readily find counterparties.
In mid-September, Bloomberg reported that public money-market funds in the kingdom have been asked to limit investments and assets held outside Saudi Arabia to 5% within two years, citing a recent circular from the CMA.
The circular noted that as much as $7 billion could flow into domestic Saudi assets from money market funds under new curbs on overseas investments.
Reforms easing restrictions on foreign investment in Saudi Arabia took effect at the start of February, replacing the previous qualified foreign investor regime.
In the same month, the CMA said it was also reviewing a proposal to raise the foreign ownership limit and hoped to introduce the change this year, although no specific date has been announced.
Foreign investors are currently allowed to own up to 49% of a Saudi company, leaving the kingdom as the only major Gulf market with such a cap. Morgan Stanley analysts estimate that removing the limit entirely could attract about $7.4 billion into Saudi equities.
“Raising the 49% foreign ownership ceiling would be an important step, particularly for larger global investors that need meaningful position sizes,” said Abbas.
“The February opening of the market to all foreign investor categories was also important, but the ownership ceiling remains the more significant constraint on foreign institutional participation.”
The slump in Gulf IPOs is prompting firms, including HSBC and EFG Hermes, to scope out equity opportunities in markets such as Egypt, Turkey and India.
Secondary share sales in Turkey have raised $1.6 billion so far this year, nearly double the amount recorded a year earlier. HSBC leads the country’s league tables, with seven transactions raising a combined $552 million, compared with two deals worth $260 million last year.
The IPO slowdown is also leading firms such as Baker McKenzie, Akin, and their competitors to increasingly turn to debt and M&A work to keep their capital markets teams busy.
The value of such deals involving Gulf entities rose almost 200% in the first half of the year to around $300 billion, according to Bloomberg data.
By contrast, there is little indication that listings will pick up soon.
Abbas said he expects Saudi IPO activity in the fourth quarter of this year to remain very limited, or even non-existent.
“Issuers are likely to remain sensitive to market liquidity, valuation levels and geopolitical risk, but activity does not necessarily need to wait for a full resolution of the regional conflict,” he says.
“If volatility moderates and liquidity improves, the IPO window could reopen before that point.”
Looking ahead to 2027, he expects a healthy pipeline, with around eight to 10 listings in the works.
The pipeline includes financial services, healthcare, industrials and consumer businesses, although many names remain at the announced or preparation stage rather than being CMA-approved.
“Timing will depend heavily on market conditions and achievable valuations,” Abbas adds.
“The key test will be whether the CMA reforms restore confidence in price discovery and translate strong primary demand into better aftermarket performance.”
This story was originally featured on Fortune.com