Listing companies on the Saudi Stock Exchange is a pivotal strategic step that many companies aspire to. It elevates companies to a higher level of trust, maturity, and growth in the eyes of investors and businesspeople. Once a company is accepted into the stock market, it signifies that it is a strong entity that has met all the governance, financial, and legal standards set by the Capital Market Authority.
Due to the importance of this step, the Saudi Stock Exchange has established a set of essential conditions and requirements for company acceptance. Any company that adheres to these standards can easily achieve its listing aspirations. Therefore, in this article, we will explore these conditions and the mechanisms for listing on the Saudi Stock Exchange in detail.
What does listing companies on the Saudi Stock Exchange mean?
Simply put, listing a company means officially listing its shares on the stock exchange (Tadawul), making them available for trading among investors. In other words, it transforms the company from a private company into a public joint-stock company whose shares, or a portion thereof, are offered for public subscription and traded on the Saudi Stock Exchange (Tadawul).
To reach this stage, a company must fully comply with the regulations and bylaws issued by the Capital Market Authority to ensure transparency and fairness in the Saudi market.
Listing Paths in the Saudi Market
The Capital Market Authority (CMA) offers two listing paths, each with its own criteria and target companies. These are:
(1) Listing on the Main Market (Tadawul)
This type of listing targets large companies with a strong financial track record, substantial assets, and a long operational history. It helps companies quickly access a large segment of investors and provides them with higher liquidity in stock trading.
Furthermore, it enhances the company's reputation and market position, and increases its chances of obtaining financing compared to companies that are unable to list.
(2) Listing on the Parallel Market (Nomu)
This type of listing targets startups and small and medium-sized enterprises (SMEs), offering them fewer requirements and less stringent conditions compared to listing on the Main Market, which targets only large companies.
It also helps companies access capital to finance growth and expansion, and allows them the possibility of transferring to the Main Market after fulfilling the listing requirements of this type of market.
Why do companies in the Saudi market seek listing?
Many companies in Saudi Arabia aspire to the dream of listing on the stock exchange, because once a company is listed, it enjoys tremendous advantages not available to other companies. The most prominent of these are:
- Enhanced trust and transparency: Being listed on the Saudi Stock Exchange (Tadawul) is a sign of a company's transparency and commitment to standards, reflecting its strength and credibility in the eyes of investors and businesspeople.
- Easier access to financing: Companies listed on the Saudi Stock Exchange have greater ability to attract capital.
- Access to financing more easily.
- Improved reputation and credibility: Listing raises the company's standing with clients, suppliers, and both government and private entities.
- Increased shareholder liquidity: Shareholders can easily sell their shares, giving them greater flexibility and freedom.
- Significant government support: The Saudi government provides numerous incentives and facilities to companies listed on the stock exchange.
- The ability for listed companies to use their shares as currency to complete acquisitions or mergers with other companies.
- Financial benefit for founders: Listing allows founders and shareholders to sell a portion of their shares on the market. - Special advantages in property ownership: Saudi listed companies receive significant exemptions regarding property ownership, even within the boundaries of the holy cities of Mecca and Medina, which are subject to restrictions on non-Saudi ownership.
- Attracting foreign investment and strategic partnerships: Listed companies are better positioned to attract foreign capital, whether in the form of equity investments or long-term strategic partnerships.
Basic Listing Requirements
First: Listing Requirements on the Main Market (TASI)
The Main Market targets large and mature companies and is characterized by its stringent requirements, which reflect the size and financial strength of these companies. According to the Listing Rules, the most prominent requirements are as follows:
1. Legal Form: The company must be a "Joint Stock Company," as per Article 7(a) of the Listing Rules.
2. Market Capitalization: The total expected market capitalization of all the company's shares upon listing must not be less than SAR 300 million. This requirement reflects the size of the companies targeted by this market.
3. Public Ownership: Public ownership must not be less than 30% of the class of shares to be listed, to ensure sufficient liquidity for the shares in the market.
4. Number of Shareholders: The number of public shareholders must not be less than 200 upon listing. This is another requirement aimed at enhancing the share's liquidity.
Second: Listing Requirements for the Parallel Market (Nomu)
The Parallel Market is designed as a gateway for small, medium, and emerging companies, and therefore features more flexible requirements compared to the Main Market. The basic requirements, according to the "Listing Rules" and the "Registration and Listing Rules for the Parallel Market," are:
1. Legal Form: The company must be a "Joint Stock Company," just like the Main Market.
2. Minimum Market Capitalization: The company's total market capitalization must not be less than SAR 10 million. This lower threshold facilitates entry for startups and small companies.
3. Public Ownership: This requirement is more flexible, requiring that public ownership be at least 20% of the shares, or that the value of shares owned by the public be at least SAR 30 million (whichever is lower).
4. Number of Shareholders: A minimum of 50 public shareholders is required upon listing.
5. Operating History: The company must have been operating as a primary business for at least one fiscal year, which allows relatively new companies the opportunity to list. 6. Financial Statements: The company must have prepared its audited financial statements for the fiscal year preceding the application.
Third: Common and Procedural Requirements
In addition to the specific requirements for each market, there are general and procedural requirements, including:
In short, the two tracks (main and parallel) represent strategic options for companies based on their size, growth stage, and ambitions. Each market provides requirements tailored to the nature of the companies it targets.
Listing Stages
The company goes through three main stages to list on the Saudi Stock Exchange (Tadawul), each with specific steps. These are as follows:
Preparation and Evaluation Stage
Submission and Approval Stage
Offering and Trading Stage
Stage 1: Preparation and Evaluation Stage
This stage requires a set of steps, including:
- Appointing a specialized financial advisor to manage the listing process.
- Preparing a comprehensive valuation of the company, including audited financial statements and the company's legal status.
- Developing a detailed listing plan that includes the offering percentage, timeline, and marketing strategy for investors.
- Preparing the required essential documents, such as financial statements, audit reports, and important contracts.
Stage 2: Preparing the Listing File, Submitting the Application, and Obtaining Approval
- Preparing the listing file and prospectus, including financial data and shareholder structure.
- Officially submitting the listing file to the Capital Market Authority (CMA) for review and approval.
- Obtaining final approval for the offering and its terms.
Stage 3: Offering, Allocation, and Listing
- Officially listing the shares on the Tadawul platform and commencing trading. - Opening the subscription period for institutions and the public.
- Organizing marketing campaigns for investors, including determining the final offering price.
Finally;
If you wish to prepare your listing file or need legal counsel to represent you in the listing process, please don't hesitate to contact us at Mohammed Al-Khliwi Law Firm. We would be delighted to be your partners in your success journey from the very beginning.
Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.
Mohammed Alkhliwi Law Firm is a Saudi legal practice that serves individuals, institutions, and corporations, drawing on extensive experience in litigation and legal consultancy. The firm believes that law is not merely a set of regulations and procedures, but a powerful tool to protect rights and ensure justice. For this reason, the firm is dedicated to serving its clients with the utmost professionalism and responsibility.
