Listing Guide

Introduction to the guide

Purpose of the guide
Companies across the globe face local, regional and global challenges in their respective competitive
business environments. In order to remain competitive, businesses, private and public, need to stay
at the forefront of the growth frontier through the implementation of sound business plans. A critical
factor associated with the implementation of growth agenda is the access to capital. The stock markets
are one of the largest sources for businesses and entrepreneurs to access capital, be it in the form of
debt or equity.
To support such businesses in the Kingdom of Saudi Arabia, Saudi Stock Exchange (Tadawul) has
prepared this Listing Guide to present the benefits of going public and listing on Tadawul. This Guide
helps address some of the frequently asked questions about going public, the listing requirements and
other concerns faced by companies consider going public.
The Guide also outlines the key steps required by businesses to become a listed company and the
key regulatory obligations to be followed in the Kingdom as stipulated by the Capital Market Authority
(CMA) and Tadawul.
We trust you will find this publication useful and wish you every success, both in bringing your company
to the market and as a publicly traded company. As the largest stock exchange in the region, we look
forward to welcoming you to be among the prestigious group of listed companies in Saudi Arabia.

Listing Guide

Table of contents
1 Introducing Tadawul
1.

Listing

36

Incorporation of Tadawul

Post-listing phase

37

Tadawuls vision and mission statement

Indicative listing related costs

37

Key objectives

Tadawul fees

39

Past five years key statistics relating to Tadawuls activities

4.
4

Responsibilities After A Company Goes Public

40

14

Effective corporate governance

42

What is an IPO?

16

Obligations and disclosures

45

Why list?

16

Public and investor relations

46

Advantages

17

Key challenges

18

Introduction to CMA

50

Why list on Tadawul?

19

Functions and responsibilities

50

CMA Listing Rules Requirements

20

Duties and authorities

50

22

Market conduct regulations (Trading rules)

51

Companys decision to go public

25

Listing of foreign companies in Saudi Arabia/cross listing

52

Appoint advisors

28

Preparation phase

30

Tadawuls services

60

Submit IPO application

34

Trading services

60

CMA review and decision

35

Depository services

61

Book building

36

Listing services

62

Subscription period

36

2.
2 Going Public

3 Executing Your Plan To Go Public

3.

10

5.
5

6
6.

7.
7

Role Of The Capital Market Authority (CMA)

Tadawul Services

FAQs And Glossary

Listing Guide

48

58

64

Introducing Tadawul
4

Listing Guide

Timeline
Introducing Tadawul

\\ Qualified foreign
investors allowed to
invest in listed shares

2015

2013

Incorporation of Tadawul
Tadawul traces its history back to the mid-1930s when the Arabian Automobile
Company was established as the first joint stock company in Saudi Arabia. Regular
expansion of economic markets and the introduction of localownership of part of
foreign banks led to the emergence of large corporations in 1970s. SAMA was the
government body charged with regulating and monitoring market activities until CMA
was established on 1424H/2003G. CMA is the sole regulator and supervisor of the
capital market. It issues the required rules and regulations to protect investors and
ensure fairness and efficiency in the market.
On 1428H/2007G, the Council of Ministers approved the establishment of Saudi Stock
Exchange Company (Tadawul).This was in accordance with Article 20 of the Capital
Market Law. Tadawul is the largest stock exchange in the Middle East region, with the
largest initial public offerings (IPOs), capital raised and market capitalization.

\\ Launch of Tadawulty
services

2011
\\ Launch of ETF trading

2010

\\ Electronic voting
\\ Launch of new identity

\\ World federation of
exchange membership
\\ Launch of e-trading for
sukuks and bonds

2009
\\ Applying sector index

2008
\\ Formation of
Saudi Stock Exchange
(Tadawul)

\\ Beginning of electronic
settlement and clearance
(T+0)

\\ Framework to establish
stock exchange and
Capital Market Authority

2001

1990
\\ Establishment of Saudi
Share registration
company

\\ Opened market for

foreign investors through
SWAP agreement

2007

2003

\\ Automated trading
system launched

1985

1984

\\ Introducing the
new tradable rights
framework

\\ Ministerial Committee
formed to develop and
regulate the market

Listing Guide

Tadawuls vision and

mission statement

Key objectives
Tadawuls main objectives to guide its vision are as follows:

Operating the market efficiently and delivering

service excellence:

Vision
To be an integrated financial
exchange that fosters the
development of a diverse
Saudi capital market and
competes internationally
Mission
To offer sound, efficient and
attractive capital market
products and services that
deliver superior value to
our market participants and
stakeholders

\\ Operate the market effectively and efficiently

\\ Ensure market integrity, quality and fairness
\\ Support investor education and awareness efforts
\\ Develop service excellence for customers (brokers,
issuers, investors, vendors, etc.)
\\ Develop the Exchanges capabilities and competencies

Developing a leading financial exchange by supporting

competitive investment and financing channels:
\\ Support efficient capital raising for companies
\\ Provide innovative, diversified, and integrated financial
markets, products, services and instruments
\\ Attract national and international market participants
\\ Integrate and leverage offerings across the value chain
\\ Facilitate provision of superior financial returns and
shareholder value

Listing Guide

Past five years key statistics relating to Tadawuls activities

As at the end of 2014, Tadawul had a total of 169 companies listed on the exchange. These companies
are classified into 15 market sectors. The Tadawul All Share Index (TASI) comprises the companies listed
on Tadawul and acts as a key analytical tool to track the stock markets performance. It is one of the key
indicator to investors overall sentiment and performance of companies listed on the Exchange. Tadawul
publishes various sector specific indices such as retail, cement, transport, petrochemical industries,
insurance, etc. which can assist market participants in analyzing sector performance. Tadawul, also,
provides a market for trading Sukuks, bonds and exchange traded funds (ETFs).
The table below shows the number of listed companies by sector over the period 2010 to 2014.

Sector

Sector
Insurance

2010

2011

2012

2013

2014

380,000

160,000

60,000

157,500

Agriculture & Food Industries

413,100

1,328,400

Building & Construction

612,000

331,500

540,000

729,000

Petrochemical Industries

Industrial Investment

757,500

234,000

Cement

650,000

489,500

1,796,000

900,000

275,000

2010

2011

2012

2013

2014

Insurance

31

31

33

35

35

Banks & Financial Services

Agriculture & Food Industries

14

15

16

16

16

Retail

396,000

539,600

364,500

900,000

Real Estate Development

1,020,000

22,500,000

Building & Construction

14

15

15

16

17

Petrochemical Industries

14

14

14

14

14

Multi- Investment

350,000

Industrial Investment

13

13

14

14

14

Cement

10

12

13

14

Telecommunication &
Information Technology

Banks & Financial Services

11

11

11

11

12

Transport

Retail

10

10

11

12

14

Media & Publishing

Real Estate Development

Hotel & Tourism

1,368,000

825,000

Multi-investment

Enegy & Utilities

Telecommunication &
Information Technology

3,832,600

1,727,000

5,326,000

1,962,000

25,229,000,000

Transport

Media & Publishing

Hotel & Tourism

Energy & Utilities

146

150

158

163

169

TOTAL

10

The table below highlights the annual amount of capital raised (SR 000) between 2010 and 2014
across various sectors

TOTAL

11

Listing Guide

1,753

759

1,000

2010

12

1,370

1,400
1099

1,250

1,271

Trading Value

1,500
1,325

Market Cap

SR billion

1,750

1,813

1,929

2,000

2,146

At the end of 2014, the market capitalization of all companies listed on Tadawul was SR 1,813 billion,
and the value of shares traded was SR 2,146 billion. The chart below highlights the trend with respect
to market and trading value over the past 5 years.

2011

2012

2013

2014

13

Listing Guide

Going Public
14

15

Listing Guide

Going Public

Advantages of Listing

What is an IPO?

Enhances visibility of the company

An Initial Public Offering (IPO) is the first offering of shares

made by a company to the general public. It is one of the most
crucial strategic decisions that can be made in the lifetime of
a company. It offers the existing owners an opportunity to
not only obtain access to a wider pool of capital and expand
the investor base but also bring about key structural and
operational changes in a company.
For investors, an IPO is an opportunity to invest, become a
part owner of the company and play an important role in
the strategic decisions associated with its future growth.
One of the most significant reasons to invest in an IPO is to
earn return through dividends and the performance of the
stock price which reflects the financial growth prospect of the
company and the industry in which it operates.

Advantages
of listing

Enhances visibility
of the company

Access to wider
capital pool

Creates certainty
about a companys going
concern status

Helps in regional and global

expansion

Increases the investor

base and diversifies risk

Enhances liquidity
for shareholders

Why list?
Going public is a significant transformational decision in a
companys development that requires a series of planned,
pervasive changes to the company, its owners and its culture
to achieve long-term strategic objectives including business
continuity, market leadership and shareholder wealth value
maximization.

Easier to value for

potential mergers and
acquisitions

Encouraging employees
commitment

Improves credibility
of a company in
the market

Easier to benchmark a
companys market position
in a sector

A listing provides the benefit of showcasing the business

strategy and performance through increased media coverage
and availability of analysts reports. It helps in enhancing the
corporate brand and attracts new investors, customers and
suppliers without incurring extra spending. Potential investors
get an opportunity to participate in the companys growth
plans, its market positioning, financial performance, etc.

Access to wider capital pool

Going public enhances the options that are available to a
company with respect to raising capital. Access to a wider
pool of equity capital can help a company achieve its growth
objectives along with providing flexible financing alternatives.
Typically, a listed company is also in a position to raise debt
capital at a lower rate of interest with longer maturity duration.
Listing on a stock exchange adds confidence to investors.

Creates certainty about a companys going concern status

Establishment of a separate legal entity, which is listed, provides
enhanced comfort around continuity of a companys operations in
the longer-term. This is contrary to the risks involved in the case
of a family business, where the second and third generations
of the family may face challenges and becomes difficult to
promise the same continuity of interest, management and
performance as the first generation. Also, internal disputes
are sometimes common within family businesses, which
can hinder the performance of a family owned and managed
enterprise.

Helps in going global

A public joint stock company works under the regulatory
guidance of CMA, which requires the company to publish
information on a regular and timely basis. Disclosure of a

16

companys financial performance to investors is mandatory

under various regulations, and assists in improving
transparency, and eases access to broader options of growth
for business including Mergers and Acquisitions (M&A), Joint
Ventures (JV), and expansion into foreign countries. This could
also help in attracting foreign investment into the company
where it will increase investors base and diversifies risk.

Increases investor base and diversifies risk

Involvement of a large number of institutions and individuals
investing in a listed entity helps diversify the risk involved and
provides a company with more options to enter new markets.

Enhances liquidity for shareholders

Investment in a listed company is considered a more liquid
form of investment due to the ease and ability of investors to
buy and sell shares on the exchange, making such investments
more attractive. Tadawul offers a significantly higher level of
liquidity compared with other GCC countries.

Easier to value for potential mergers

and acquisitions
One of the critical components in M&A activity is the valuation.
Given that listed companies have a quoted price per share
available on the exchange on a daily basis, it makes it easier
for the companies to engage in M&A activities.

Encourages employees commitment

Many listed companies motivate their employees through
long-term share incentive schemes (Employee Share Options
Programs or ESOPs ) which can provide employees with the
benefits of ownership. This is a feature that can help attract key
talent to the company and encourage long-term employment
and goal alignment between employee and company.

17

Listing Guide

Transparency and availability of information relating to a listed

company in the market provides confidence to various stakeholders
associated with the company. They can evaluate their investments,
and make a buy or sell decision with ease. A well performing
company always takes advantage of this to ensure that it generates
a stronger brand and credibility in the market.

Easier to benchmark a companys

market position in a sector
It is easier to compare a listed company to its peers due to
the availability of information. For instance, a petrochemical
company can be compared to other listed entities in the same
industry as well as with the Petrochemical sector index to
establish its relative performance.

While there are a number of benefits of being a publicly listed

company, there are also challenges, especially with respect to
legal and disclosure requirements and on-going regulatory costs.

Why list on Tadawul?

CMA has outlined the disclosure requirements to be followed

by companies listed on Tadawul. These requirements enhance
the responsibility of a public company towards CMA, Tadawul
and investors. Whilst transparency and disclosure can be the
strengths, they can also act as a major challenge for a public
company as they lose aspects of confidentiality, especially
in cases where the companys peers are not listed. In such
cases, there can be an apparent concern around having
more information in the public domain over the competitors.
Regulatory rules also add another layer of necessary
compliance for a listed company.

Tadawul provides a platform for companies to attract various investors through access to the exchanges large liquidity pool
and broad investor base complimented by its state of the art trading infrastructure which connects investors, traders and
brokers. Saudi Arabia being the largest economy within the region adds to the strategic significance of Tadawul and enhances
its attractiveness further.

Cost and time lag

Listing a company has its associated costs; these include
expenses incurred on legal, financial, accounting, external
consultants/advisors and compliance matters. These
additional expenses need to be carefully evaluated and
compared with the benefits of an IPO, when deciding to go
for listing. An IPO can often take a long time to complete
due to the work associated with preparing a company to go
public. (Also refer to indicative listing related costs outlined
on p39 of this guide).

Longer decision making process

Challenges
of listing

Longer decision making

process

Transparency/Disclosure
and greater responsibility

Tadawul also has a best in class primary market team which is solely focused on ensuring that businesses maximize value by
being listed on the Exchange.

As compared to private companies where strategic decisions

are typically taken by the owner or a small group of decision
makers, major strategic decisions require board of director
and sometimes shareholder approval as they have an
impact on the performance of the company. Accordingly, the
decision making process for a public company takes longer
as the company is required to follow set governance rules
and regulations around board of director and shareholder
meetings.

State of the art

infrasructu
ding
re
tra

Best in class
prim
ary market team

Key challenges of listing

Transparency/disclosure and greater responsibility

Why Tadawul

Lo
n

ns
g-t
erm i
atio
nvestor rel
supp
ort post - IPO

Cost and time lag

18

19

Listing Guide

Acc
st
ess to
the bigge
eco
nomy i
ion
n the reg

Improves credibility of a company in

the market

Why list on Tadawul?

Tadawul provides a platform for companies to attract various
investors through access to the exchanges large liquidity pool
and broad investor base complimented by its state of the
art trading infrastructure which connects investors, traders
and brokers. Saudi Arabia being the largest economy within
the region adds to the strategic significance of Tadawul and
enhances its attractiveness further.

2. Conditions for registration and admission to

listing:
The key conditions that need to be met in order
to be listed on Tadawul are;
a. The company must be a Saudi Joint Stock Company
except where the provisions of article 14 (cross listing)
of these rules apply

Tadawul also has a best in class primary markets team which

is solely focused on ensuring that businesses maximize value
by being listed on the Exchange.

b. Have carried out a main activity for at least 3 years

CMA Listing Rules Requirements

c. Have at least 200 public shareholders

CMA has issued Listing Rules and regulations that need to be

followed and complied with by companies seeking to list on
Tadawul. The Listing Rules provide key requirements that an
issuer needs to follow pre and post the listing process, after
the issuers board has approved the listing of the securities of
the company.

d. Have 3 years audited financial statements and the

1. Appointment of Advisors: CMA requires the issuer

to appoint an independent Financial Advisor who is
licensed by the CMA to advise the company on various
CMA related rules and regulations. There are specific
requirements that the Financial Advisor needs to fulfill
with respect to the listing process, which are outlined in
the Listing Rules. An independent Legal Advisor licensed
to practice in Saudi Arabia must also be appointed

with substantially the same management

latest interim financial statements produced since the

date of the last annual report and the most recent

3. Listing and registration: The actual process of listing

requires the issuer to ensure that the offered securities
are fully underwritten by an underwriter authorized by
CMA. Further, the issuer, in consultation with its Financial
Advisor, needs to submit documentation such as an
application for registration, prospectus, etc. in accordance
with the Listing Rules. Acceptance of the listing is subject
to CMAs approval of the issuers compliance with the
Capital Market Law and CMAs Regulations.
4. Compliance with listing rules: An issuer must comply
with the Listing Rules and provide information and
explanations to CMA as and when required. The Financial
Advisor appointed by the issuer can assist in providing
all the required information along with clarifications. It is
important to note that CMA may take appropriate actions
in the interest of investors.

5. Continuous obligations: Listed companies are required

to comply with CMAs listing and other applicable
rules and regulations on an on-going basis to ensure
continuity of their status as a listed company. Some
of the key obligations include requirements relating
to disclosure of material developments and financial
information in accordance with the prescribed time lines,
announcements, publications, duties of the board of
directors, notification relating to securities, payments of
fees, etc.
The Listing Rules also cover provisions relating to capital
injection and reduction. Some of the aspects discussed
above are aimed at providing a general overview of key
requirements and do not cover the detailed requirements
that an issuer would have to follow with respect to the
listing process. For more details, please refer to the
Listing Rules issued by CMA which are available at
www.cma.org.sa

audited financial statements

e. An appropriately experienced
management team
f. The company must not have carried out certain
financial restructuring within the last 1 year
g. It must have sufficient working capital for the
next 1 year
h. The aggregate value of shares listed must be at
least SR100 Million
i. Following the offering, at least 30% of
the shares must be owned by the public

20

21

Listing Guide

Executing Your Plan To Go Public

22

23

Listing Guide

Executing Your Plan To Go Public

A company that intends to go public should follow the process

detailed opposite for listing on the Saudi Stock Exchange
(Tadawul).

24

Tadawul Primary Markets Team (guiding companies through the process)

Executing your plan to go public

Once it has decided to

go public, a company should
have a business plan, and
a targeted timeframe for
listing

First step: Companys decision to go public

Company
decision

Appoint
Advisors
Ensure overall readiness,
Conduct due diligence,
prepare valuation,
prospectus and application
forms

Preparation
phase

Submit IPO
Application
CMA reviews the
application and assesses
the adequacy of discoursers
in the prospectus and if
acceptable, announces its
approval through Tadawul
and CMAs website

Filing of an application to
CMA along with all relevant
documents

CMA review
and
decision

IPO book
building
Subscription period, IPO
proceeds received, share
holder allocation and
refunds, provide Tadawul
with shareholder file

Appointment of Financial
and Legal and other
Advisors

Marketing to institutional
investors, allocation
between retail and
institutional determined

Subscription
period

List on
Tadawul

An IPO in itself is not an isolated event but a series of steps in

an important transformation journey of companies. Each step
acts as a milestone for the success of the process and thus the
transformation of a private company, to a large public compan
, to a large institutionalized public company.
To launch a successful IPO, one of the more critical steps is
to prepare and plan. Planning includes understanding the
importance of the IPO for the prescribed objective. Whilst the
execution process of an IPO event itself generally lasts for
6 to 12 months at least, the overall timeframe for realizing
substantial value from an IPO begins at least 1-2 years before
the actual listing and continues well beyond that. Some of
the more important steps during this journey are listed on
this page. The key to a successful IPO (value obtained and
time taken) is to start implementing as many of these steps
as possible well before the start of the implementation of the
IPO process.

\\ Ensure all key shareholders/family members understand

and accept the changes that will come about as a result
of transforming the business to a public company
\\ Confirm the strategy of the business is there a clear
vision?
\\ Ensure the company has a compelling equity story i.e.
strong historical track record and clear, positive growth
outlook
\\ Fill necessary management team gaps benchmarking the
company to ensure competitiveness
\\ Carry out required restructuring (capital, holding company
etc) and implement required governance changes to
comply with CMA guidelines
\\ Ensure the company has a strong finance function that
can meet strict reporting guidelines and support the IPO
and ongoing budgeting and forecasting requirements
\\ Prepare business plan, financial projections and
understand potential IPO pricing issues, size of offer, use
of proceeds
\\ Consider carrying out independent pre IPO readiness
assessment

After completing
the information and
documentations required
by Tadawuls and CMAs,
an announcement will be
made in Tadawul and CMAs
websites, and secondary
trading will begin

\\ Act like a public company even before becoming one.

25

Listing Guide

One of the key areas on which investors place significant

emphasis is on the past and expected future financial
performance of the company. The quality of the companys
equity story is one of the most important determinants the
quality of the companys equity story is one of the most
important determinants of whether or not a company
should consider an IPO, together with the readiness of the
shareholders to accept the changes an IPO will bring about.
Once a company decides to go public and the decision is
approved by the board, it needs to prepare an action plan
including the steps necessary for appointing a financial
advisor. This is followed by the identification of key company
employees to be involved in the IPO process, which generally
includes a director, Chief Executive Officer (CEO), Chief
Financial Officer (CFO), and Chief Information Officer (CIO).

Keeping options open

Most companies are now following a multi-track approach
which involves an IPO and evaluating alternatives in parallel
which act as a backup plan. A multi-track approach means
a combination of the following approaches:
1. Considering a sale in the M&A market: This option
requires a detailed evaluation of the suitability and viability
of a merger or an acquisition as an alternative to an IPO. A
company needs to evaluate whether a merger or acquisition
would be more beneficial to its strategic options than an IPO.
2. Private placement, a pre-IPO step: This can be done
either for the purpose of raising funds for growth and
expansion instead of carrying out an IPO or bringing in
one or more external shareholders to assist with and add
value to a future IPO. It often involves commitment to a
future IPO to provide some form of exit option for the
new shareholder in return for that company providing
capital and management and/or technical expertise.
3. Joint ventures and strategic alliances: This option
could provide the company with greater operational
efficiencies and access to knowledge, with minimal
cost. Joint ventures can be helpful in entering new and
strategic markets and geographies, giving an opportunity
to expand the business, access new technology, and
reduce costs and risk.

26

Some of the other key considerations that need to be assessed

at this stage include:
a. A comprehensive business plan and a detailed
timeline: The company is required to showcase its
operational, financial, and strategic initiatives along with
its business strategy to be implemented in the near
future. The business plan brings together these elements
and acts as a key document that outlines the plan going
forward. A critical component of the business plan is
the detailed implementation timeline relating to any
strategic initiatives.
b. Potential growth of market size and an equity
growth story: The company should be in a position
to articulate and sell the potential growth story to its
investors through facts and figures and a demonstrable
track record. An independent assessment of the market
will eventually be required to support market disclosures
in the prospectus.
c. Benchmarking with peer group and demonstrating
competitiveness: The company should start to benchmark
its relative market position through competitive benchmarking
amongst its peer group.
d. Acting like a public company before the IPO:
A company is required to demonstrate its strength
in terms of financial performance and integrity and
transparency in business to generate confidence among
potential investors. Companies should start to act like a
public company well before actually becoming one in
order to embed these disciplines internally and provide
confidence to regulators and potential investors.
As this stage, undertaking an IPO readiness assessment
can be a useful exercise to identify the key areas that the
company needs to focus on, in order to better prepare itself
for an IPO. Such an independent readiness assessment can be
invaluable to the owners in providing a clear picture of what
the company needs to work on before applying to go public.
The reason that many IPOs are delayed or cancelled is due
to the fact that the company is just not ready at the time of
starting the application process. These unpleasant surprises
could be easily avoided by having an independent readiness
assessment carried out.

27

Listing Guide

Second step: Appoint advisors

Professional and licensed external advisory team

Appointment of the advisory team

A company considering listing is required to appoint a team of advisors that deals with the IPO regulatory bodies such as CMA
and Tadawul on behalf of the company.
Below is a list of advisors along with their roles who manage the process of listing, and provide guidance to the company at
different stages.

\\ Financial Advisor: CMA provides licenses to professional

advisors for providing IPO related services to applicants.
They provide guidance to fulfill regulatory requirements
by acting as a representative of the company as well as
managing the other advisors.

Advisors

Lead Manager

\\ Manages the IPO

process
\\ Manages the retail
subscription

28

It is critical that the company sells its IPO story to the

investors and follows all the laws and regulations regarding
the listing process. Experienced advisors play an important
role in assisting a company present its IPO story in the most
appropriate manner. The advisory group typically comprises
the following advisors:
\\ Lead Manager: Provides overall management of the
IPO process and works closely with all other advisors in
the process.

\\ Public Relations/Media Advisor: Building effective

public relations, starting with bringing information to the
knowledge of prospective investors and addressing their
concerns is key to a successful IPO. The Public Relations
Advisor conducts road shows, media campaigns, etc.,
using all available channels of communication with the
prospective investors in accordance with the applicable
Capital Market regulations.

Financial
Advisor

Legal Advisor

Underwriter

\\ Ensures compliance
with CMA rules
\\ Communicates with
CMA and investors
\\ Provides advice to
the company
\\ Manages the
institutional book
building process

\\ Undertakes the
legal due diligence
\\ Provides advice on
all legal matters
\\ Ensures legal
sections of the
prospectus are in
accordance with the
Listing Rules

\\ Underwrites
the issue and
sometimes involves
other underwriters

Financial
Due Diligence
Advisor

\\ Undertakes the
financial due
diligence

Public Relations/
Media Advisor

\\ Manages media
campaigns and
road shows
\\ Works on brand
enhancement

\\ Legal Advisor: The legal advisor assists with any

necessary restructuring of the company, reviews material
contracts and agreements, advises on shareholder rights,
articles and by-laws and together with the financial
advisor advises the company of the requirements of the
Capital Market Law and Listing Rules. The Legal Advisor
also plays a very big role in the review of the prospectus.
\\ Underwriter: The CMA requires any offer of securities including
IPOs to be fully underwritten by an authorized underwriter.
\\ Financial Due Diligence Advisor: A key component
of the prospectus preparation is the analysis of financial
information, which is typically covered as part of the
financial due diligence process.

29

Listing Guide

Third step: Preparation phase

As mentioned earlier, the key to a successful IPO is for the company to plan early and start to structure itself and act like a public
company well before its actual IPO. By the end of this phase, all IPO readiness requirements need to have been completed.

Ensure strong senior management team

Quality of management remains one of the most important non-financial factors considered by institutional investors in making
a decision to subscribe to an IPO.

Appoint a board
with independent
members

Improve internal
control measures

Establish a
qualified audit
committee

1. Appoint a board with independent members:

The companys shareholders should consider appointing
independant directors who are experienced in handling
IPOs as board members. This group should have good
exposure across the business and bring that experience
to the IPO process.
2. Improve internal control measures: Internal controls
are defined as a process, affected by the organization
structure, work and authority flows, people and
management information systems, designed to provide
reasonable assurance regarding the achievement of
objectives in the following categories: a) Effectiveness
and efficiency of operations; b) Reliability of financial
reporting; and c) Compliance with laws and regulations.

30

Establish and
implement an
acceptable
executive
compensation
structure

Implement board
meetings and
reporting process

The dynamic nature of reporting requires adequate

and appropriate control mechanisms to be in place.
Therefore, it is necessary to ensure the existence of
comprehensive internal control policies.
3. Establish a qualified audit committee: The audit
committee of the board reviews and provides insights
into the annual and quarterly performance of the
company and meets regularly and independently with
the companys external auditors.
4. Establish and implement an acceptable executive
compensation structure: Remuneration packages
should be balanced, in line with the profitability of
the company and sufficient to reward high performing
executives. The executive compensation structure should

align the long-term senior managements objectives

with the companys business plan.
5. Implement board meetings and reporting process:
Certain decisions should be taken only by the board in
meetings held in accordance with established protocol.
All decisions of the board should be documented
and reported in accordance with company and CMA
regulations. Board committees may be formed
which will require their own appropriate meeting,
documentation and reporting protocols.

\\ Other due diligence (e.g. environmental, actuarial, etc.)

if applicable
\\ Preparation of appropriate supporting schedules for
extraction of comfort in respect of the prospectus
\\ Implementation of appropriate financial reporting
controls prior to the IPO / listing (or alternatively the
obligation to implement proposed controls with an
implementation timetable in place, post IPO)
\\ Confirmation of managements incentive plans.

As part of the IPO preparation phase the issuer / company

will need to conduct a number of activities alongside the
preparation of the prospectus. These are summarized below:
\\ Due diligence of historical financial information (typically
completed by accountants)
\\ Legal due diligence
\\ Preparation of detailed financial model (income
statement, balance sheet and cashflow with supporting
assumptions)
\\ Preparation of the valuation of the company based on
various valuation techniques as required by the CMA
(discounted cashflow, comparable company multiples,
Tadawul Price Earning Multiples)
\\ Based on valuation, shareholders set preliminary IPO
price range
\\ Preparation of working capital model
(and associated working capital report by accountants)
\\ Finalization of legal structure

31

Listing Guide

Valuation considerations
The valuation of the company and the related price at which
the shares are offered to the investors is a critical aspect of
the IPO preparation phase. Following is a brief description
of different valuation methods that are typically adopted to
value a business:
\\ Discounted Cash Flow Method -The DCF method, which
is an income based approach, is underpinned by the
premise that the value of a business is based on the
future cashflows that it will generate. This method
involves estimating the future free cash flows on a year
by year basis.It applies an appropriate discount rate on
the projected free cash flow, which takes into account
key business and operating risks of a business. It also
takes into consideration the companys capital structure
\\ Comparable company method The comparable company
method, which is a market approach based method,
values a business based on the trading prices of shares
of companies engaged in similar lines of business and
operating in the same industry sector as the company
being valued. It entails identifying a suitable/relevant
market multiple and applying these multiples to the
companys financial parameters. Some of the commonly
used market multiples are:
Price to Earnings (P/E)
Enterprise Value to EBITDA (EV/EBITDA)
Price to Sales (P/S)
Price to Book value (P/BV)

32

\\ Net Asset Value Method The net asset value method is

generally utilized when the value of an entity is closely
related to the value of its underlying assets. The value for
a business calculated under this method is based on the
aggregate value of its net assets i.e. assets less liabilities
as of the valuation date.

Prospectus preparation
The prospectus plays a vital role in the issuance of company
shares. It is an official document published by the company
that contains all the key information about the companys
business, management, financial performance, risks, future
plan of action etc. A prospectus also includes information
relating to the securities to be traded and related terms and
conditions. This information enables an investor to make an
informed investment decision for that security.

Listed below are details of some of the other mandatory

information which must be covered in a prospectus:
\\ Summary of the offer including total capital and
number of shares
\\ Targeted type of investors
\\ Contact details of all the key personnel involved
in the IPO
\\ Timetable showing key dates and the subscription
procedure
\\ Industry information for the sector in which the
company operates
\\ Organizational structure
\\ Key financial information and management discussion
and analysis
\\ Dividend policy
\\ Plans for application of funds from the offer

refer to annex 4 of the Listing Rules.

Timing the market offering

The company should ensure from the initial stages that
the timing of the IPO is appropriate to achieve the desired
valuation. To achieve this goal, a company needs to plan well
ahead and accordingly should seek to:
1. Manage the pressure appropriately: by recruiting
a highly qualified and experienced management team
who can support taking the company public. Typically,
a company would have to gather inputs from external
advisors, including investment banks, authorized persons
and auditors/financial advisers.
2. Seek the window of opportunity: The company
should assess the market and investor receptiveness to a
new security issuance in this particular industry. Also, the
company needs to provide adequate time to implement
any organizational and other readiness changes required
pre-IPO.

\\ Key risk factors

\\ Various declarations
\\ Legal information
\\ Documents available for inspection
\\ External auditors report for the three financial years
immediately preceding the date of publishing the
prospectus.
For a full list of the required contents of the prospectus,

33

Listing Guide

Fourth step: Submit IPO application

A company planning to list its shares submits an application to
CMA, along with various other documents as specified in the
CMA Listing Rules. Below, are some of the documents that are
submitted (hard copy and electronic) at the time of filing the
application for listing:
\\ IPO application letter signed by an authorized officer of
the company as per Annex 1 of the Listing Rules
\\ Letter of appointment for the Financial and Legal
Advisor
\\ List containing names and civil registry numbers of
directors, senior executives and their relatives
\\ Draft prospectus in Arabic

\\ Report by an external auditor certifying the adequacy of

working capital for the 12 months following the date of
publication of the prospectus
\\ Legal and financial due diligence reports

Fifth step: CMA review and decision

Once a prospectus is prepared by the company and its advisors, it is submitted to the CMA for its review and decision.
Subject to submission of complete application, CMA reviews the prospectus and reaches a decision within 45 business days of
its submission. The typical process is as follows:

\\ Subscription form
\\ Declarations as per Annex 2 outlined in the Listing Rules
The list provided above is not exhaustive, but illustrative in

Review
Application &
Prospectus

Announce
Decision on
Website

Decision

nature. For a detailed list of documents required, please refer

to Article 19 of the CMA Listing Rules. For more information
related to Prospectus filing and its approval by CMA, visit
www.cma.org.sa

Review Application and Prospectus

Decision

CMA reviews the submitted application, ensures it complies

Once the application is completed and all necessary

with the Listing Rule, and informs the companys financial

disclosures have been properly reflected in the prospectus,

\\ All underwriting commitment letters

advisor about the missing requirements. CMA also reviews

the application will be presented to CMAs board of directors

\\ Issuers certificate of commercial registration and articles

the submitted prospectus and assesses the adequacy of

for the decision.

of association
\\ Annual report and audited annual financial statements
of the issuer

its disclosures. If there are any discrepancies noted or

amendments needed in the submitted prospectus, the CMA

Announce Decision on Website

notifies the companys financial advisor.

Decision will be noted electronically through the websites of

CMA and Tadawul.

\\ Latest interim financial statements

34

35

Listing Guide

Sixth step: Book building

This period covers the time after the CMA has approved the
companys IPO application but before the commencement of
the subscription phase where the shares are offered to the
retail investors.

Pre-marketing requirements
The company needs to prepare detailed investor presentations
together with the draft prospectus and other company media
information prior to the road show of presentations to the
selected institutional investors. The investor presentations
are conducted by the management team. Additionally
institutional investors would have access to key documents;
including prospectus and valuation model, contained in a data
room.
Building a pipeline of potential investors is also an
important component of the pre-marketing exercise with
the underwriting team. Companies also should be prepared
to directly reach out to potential investors through ongoing
dialogue, conference attendance and marketing visits.

Understanding the audience

The management preparing for the road show should build
a rapport with the target investor audience. It is important
to communicate a high level of excitement and passion
during road shows as this helps create a PR buzz around the
opportunity to invest in the companys IPO.

Extensive marketing
Marketing should be conducted through effective road show
presentations, the focus of which is communicating the IPO
story, the companys strategy and future growth plans
all of which support the valuation price range. These road
shows comprise extensive meetings and discussions with
prospective investors that help gather ideas about their

36

investment criteria. Typically, institutional investors rely more

on information gathered through these presentations than by
visiting the company.

Price and allocation determination

Based on the levels of demand from institutional investors
for the various ranges of share prices, together with the
CMAs requirement for demand coverage, the offer price
and preliminary allocation between retail and institutional
investors will be determined. At this point, the companys
financial advisor advises the CMA of institutional subscriptions
and confirms allocations to the institutions. There will be
clawback provisions agreed with the CMA such that high
demand from retail investors during the IPO could result in a
prorate lower allocation to institutional investors.

Seventh step: Subscription period

At this stage the price at which the companies shares will
be offered to the public has been confirmed through the
institutional book building process. Therefore prospectus can
be finalized by inserting the offer price. Copies are lodged
with the CMA, published on their website, and printed for
distribution to receiving banks where they will be available
for inspection by interested retail investors.
The subscription period runs for a set number of days
stipulated by the CMA. IPO proceeds are received, share
allocations and refunds for over subscriptions are made by
the receiving banks. A final shareholder file is then sent to
Tadawul along with the application for listing and request for
a ticker symbol.

Eighth step: Listing

Tadawul allots shares to the shareholders as per the
shareholders file and the start of trading of the companys
shares in the secondary market commences.

Post-listing phase
After a company becomes public and its shares are listed,
priced and allocated to investors, the post-listing phase of
activities begins. These activities are equally as important as
the pre-IPO preparations. A listed company is required to:

Keep investors interest alive

After the successful listing of a company, the company needs
to retain and increase its value. Therefore, it is essential for
the company to develop a proactive investor relations strategy
with the objective of maintaining the stocks attractiveness.
This includes reaching out to current and potential investors
with information about the companys business, management,
market position, plans, etc. Typically, this is done through a
variety of press conferences, conference calls and investor
presentations. The investor relations team of a listed company
also must try to attract the coverage of equity research
analysts who play an instrumental role in presenting the facts
in the best possible way to the investor community.

Keep its promises

Another key factor that the management of a listed company
need to be mindful of is to ensure that any promises made
during the IPO process are delivered. This includes appropriate
usage of the IPO funds, meeting growth plans, achieving
operational efficiencies, enhancing shareholder value and an
improvement in share price.

targets adds to investor confidence and helps in the long term

outlook of the company.

Indicative listing related costs

There is no fixed cost related to listing of shares as the listing
costs associated with the share offerings vary from company
to company. In general, the cost is based on various factors
that include:
\\ Readiness of the company
\\ Size and complexity of companys operations
\\ Quality and availability of company management team
to support the IPO process
\\ Amount of pre-IPO restructuring required
\\ Experience of the Financial Advisor, especially in leading
IPOs in the companys sector
\\ Amount invested in promotional campaigns
\\ Profile of advisors appointed
The table opposite highlights the total subscription cost as a
percentage of the total offer value for companies that listed
during the period 2010 to 2014. There is some element of
fixed costs in the total cost of subscription so as a percentage
of the offered value, larger IPOs tend to have a lower cost to
value ratio.

The investor community keeps a close track of the usage of

IPO funds. They prefer the money to be used for accelerating
the companys growth by developing new products and
services, entering into new geographic markets, expansion
of operations, acquisition of other companies, investment in
latest technology, cost reduction programs, etc.
The management must also try to keep its operational and
financial targets realistic because meeting or exceeding these

37

Listing Guide

The table below shows the total offer value for companies that listed during the period 2010 to 2014

Tadawul fees
Tadawul charges annual listing fees based on the paid up

Total value of
offered shares
(SAR 000)

Total cost
of subscription
(SAR 000)

Cost to
value %

Herfy Foods

413,100

13,667

3.31%

AlSorayai Group

243,000

17,000

Shaker

514,500

Al-Khodari

capital of the company which covers costs associated with

Annual registry fee (SR)

Capital (million)
Up to 100

180,000

+100 200

220,000

+200 500

300,000

7.00%

+500 2,000

400,000

22,000

4.28%

+2,000 5,000

500,000

612,000

25,000

4.08%

+5,000 10,000

600,000

Aslak

331,500

17,000

5.13%

+10,000

700,000

Extra

396,000

16,000

4.04%

Takween

234,000

21,000

8.97%

AlTayyar

1,368,000

50,000

3.65%

Saudi Airlines Catering Company

1,328,400

33,000

2.48%

539,600

20,000

3.71%

Care

364,500

14,000

3.85%

Bawan

540,000

26,000

4.80%

Farm Superstore

270,000

13,000

4.81%

Al Hokair Group

825,000

26,000

3.15%

Al Hammadi

630,000

20,000

3.17%

22,500,000

25,000

0.11%

729,000

20,000

2.74%

Year/issuer

providing the share registry related services. The table

outlines the various fee brackets.

2010

2011

2012

Dallah Health

2013

2014

NCB
EIC

38

Cost

39

Listing Guide

Responsibilities Of A Publically Listed Company

40

41

Listing Guide

Responsibilities of a publically listed company

\\ Corporate Governance booklet which summarizes the
importance of governance and covers, for example, but

Advantages
Of Corporate
Governance

not limited to: the core functions of Board of Directors,

Effective Corporate Governance

The CMA Corporate Governance Framework

As the MENA region integrates more into the global

In order to ensure compliance with the best corporate

it also provides simplified explanation about board

economy, the importance of effective corporate governance

governance practices, CMA has set out a clear corporate

committees.

becomes more significant than ever as it helps to improve

governance framwork covering 3 main areas:

competitiveness, transparency, domestic and foreign investor

\\ The rights of shareholders covering general rights,

attractiveness and social accountability.

The CMA regulations define corporate governance as
activities to protect the rights of the shareholders and other

board reports

procedures and organizational arrangements that govern the

relationship between the shareholders, board of directors
and executive management that are aimed at achieving the
companys long-term strategic objectives.

Listed Companies in the Saudi Capital Market which

aims to activate the role of shareholders in the General
Assemblies and to increase their awareness of the

Ensures effective
internal controls

Imposes accountability and

improves performance

\\ Board structure and responsibilities setting out the

principles of corporate governance for listed companies

and other related requirements.
\\ How to read the listed company board Directors report

basic functions of the board, its responsibilities and

which demonstrates the importance of Board of Directors

Encourages investment

composition, and the role and responsibility of other

report, where its considered to be one of the important

committees such as the audit and remuneration

committee.

sources of data and information needed by investors.

The above-mentioned aspects relating to establishing and

\\ Guidelines for Corporate Governance regulation which aims

maintaining an effective corporate governance framework

to clarify the requirements of the Corporate Governance

are an important on-going responsibility of a listed company.

Regulations.

Corporate Governance Regulations also specify the rules and

Good corporate governance ensure fairness in the work

standards governing the companies management listed in

environment and transparency and the accountability

the exchange. The regulation constitutes as guiding principles

of those responsible for their actions. The following chart

For the capital market authority to ensure better practices, it

in applying some of its articles but must disclose the provisions

shows number of points about the importance of corporate

offers presentations for newly listed companies to introduce

that have been implemented and the provisions that have

governance.

corporate governance and disclosure requirements explaining

not been implemented.

all the related aspects. The Authority also continuously issues

To view the mandatory articles in the regulation, check

awareness booklets designed to raise investment awareness.

http://www.cma.org.sa/En/Pages/Implementing_
Regulations.aspx

Number of booklets were issued related to corporate

42

\\ A Guide for the Shareholder in General Assemblies of

\\ Disclosure and transparence setting out policies and

procedures for information disclosure and disclosure in

The governance framework constitutes a coherent set of

Improves transparency
and disclosures

meeting,voting and distribution rights

a mechanism to control and direct all the companys

stakeholders (such as employees, customers and suppliers).

Secures rights of
shareholders

the classification of its members and its key functions,

In Capital Market Authority (CMA) there is a specialized unit

(Corporate governance practices unit) under the corporate
governance department which supports and stimulates
companies to apply the best practices in corporate governance
and to contact the unit on this matter: cgd@cma.org.sa.

governance:

43

Listing Guide

Imposes accountability and improves performance

Improves transparency and disclosures

Holding the board of directors accountable for timely
disclosure of information to the shareholders helps enhance
transparency and has a positive effect on shareholder
confidence.

Ensures effective internal controls

The board is responsible for formulating the appropriate
internal control policy framework and ensuring its effective
implementation thus identifying any areas requiring
improvement. This enhances the reliability of the information
shared with the shareholders and other stakeholders.

With increased focus on managements accountability, and poor

performance reflecting inefficiency, management is motivated to
extend its best efforts for improvement throughout the company.

Encourages investment
Established norms and effective monitoring of compliance by
the regulatory body helps to win the confidence of investors
and thereby enhances the scope for additional investment.
Good corporate governance can reduce the risk premium
investors place on each company which can have the effect
of increasing the valuation of the companys shares.

Enhanced governance culture

Monitoring implementation of effective governance requires
major changes in the management structure of private
companies which can make the process of implementation
difficult at the initial stage.

Mechanism for selecting board members

Corporate governance specifies the required skills to be
possessed by members of the board and the various board
committees. Finding appropriate board members, including
independent directors, can be a challenging task.
The company must have clear policies and procedures for the
membership of the board of directors.

Improving process of internal controls

Challenges
Of Corporate
Governance

Enhanced governance
culture

Improving process
of internal control

Mechanism for selecting

board members

Effective work by
committees

Defining the elements and extent of controls which could be

considered as effective may vary from person to person and
be dependent upon each persons experience. Therefore,
ensuring the effectiveness of internal controls can be difficult
and requires to be kept under regular review.

Effective work by committees

Corporate governance requires the formation of various board
committees to ensure the effectiveness of internal controls and
adequacy of appropriate skills on the board. The effectiveness
of such committees depends upon the membership of and
the persons appointed to chair such committees.
For more information, please visit www.cma.org.sa

44

ation to disclose
Oblig
developme
i
ter al
nts
ma

With the companys listed entity status, comes a new set

of responsibilities. Once a company is listed, the interest of
various stakeholders is directly dependent upon its decisions
and performance so it becomes obligatory for the company
to keep its stakeholders informed about decisions being taken
and its ongoing operational and financial performance. This
helps investors to make an informed decision regarding the
continuity of their investments.
Some of the key obligations of a listed entity and disclosures
to be made by its board are categorized below.

Disclosure
relate
d to securities

The CMA regulations define the rights which can be exercised

by the shareholders. Shareholders awareness of their rights
is a key factor in terms of engaging with them to actively
participate in the oversight of a companys growth and its
performance.

Obligations And Disclosures

Obligations
Obligations
And
and
Disclosures
disclosures

Disclosure of
finan
cial information

Secures rights of shareholders

Obligation to disclose material developments

Transactions, events or announcements are considered to be
a material development if any such activity is of a nature
that would influence investment decisions by current or
prospective stakeholders.
Possible material developments are:
\\ Purchase or sale of assets at a price equal to or greater
than 10% of net assets
\\ Raising debt equal to or greater than 10% of net assets
\\ Losses equal to or greater than 10% of net assets
\\ Significant change in a companys production
environment
\\ Any changes in the composition of the board of
directors or to CEOs position of the issuer
\\ Legal proceedings involving value equal to or greater
than 5% of net assets. Movement of 10% or more in
net assets base or gross profit
\\ Related party transactions
\\ Unexpected termination of a customer agreement
involving at least 5% of gross revenue
\\ Any interuption in the princple activities of the issuer or
its subsidiaries.

Disclosure of financial information

Keeping investors periodically updated with the financial
performance and financial position of the company is critical
from an investors point of view. Therefore, it is mandatory for

Miscellaneous

disclosures

listed companies to provide certain information as highlighted

below:
\\ Prior to publication the interim and annual financial
statements of an issuer must be approved by the
directors and signed by a director, CEO and CFO.
The board of directors report must be filed with the
Authority immediately upon approval by the directors
\\ The issuer shall announce to the exchange through the
electronic applications its interim and annual financial
statements prior to being published to the shareholders
or third parties
\\ Provision of interim financials to the CMA and
announcement to public not later than 15 days after the
end of the interim financial period
\\ Provision of annual financials to the CMA and
announcement to public not later than 40 days after the
end of annual financial period
\\ Submission of external auditors annual report along
with confirmation of their compliance with auditors
independence , as per the rules and regulations of Saudi
Organization for Certified Public Accountants (SOCPA).

45

Listing Guide

Public and investor relations

The issuer of securities is required to disclose the following

events without any delay to the CMA and the public:
\\ Change in persons holding more than 5% of the issued
shares or convertible debt instruments of the company
or of any significant changes in the holdings of such
persons

Investor relations is an ongoing activity of a company through

which it communicates with its investment community.
Usually, communications that listed companies undertake are
a mix of regulatory and other activities. Investor relations is
essentially the part of stock market life that sees companies
interacting with existing shareholders, potential investors,
analysts, and journalists.

\\ Proposed change in the capital of the company

\\ Decision to pay/declare or not to pay/declare dividend
\\ Alteration in rights to shareholders or debt holders
\\ Decision to buy back securities along with the
recommended price
\\ Any decision not to make payment in respect of debt
instruments or convertible debt instruments.

Miscellaneous disclosures
Certain transactions or events which cannot be classified in
the above categories but are essential to be disclosed as per
the Listing Rules:
\\ Alteration in the articles of association, location of office
or auditor of the company

\\ Resolution to dissolve the company

\\ Any judgment having a negative impact on access to
or utilization of more than 5% of the net assets of the
company
and for all disclosure requirements see
http://www.cma.org.sa/Ar/FormsSite/Pages/
Disclosure.aspx

46

Investor relations activity is not only required to create an

awareness and understanding of the company amongst the
investment community, it also facilitates access to capital,
thus helping to maintain liquidity in and a fair valuation of the
companys shares.
The success of an investor relations function often depends
on the following:
\\ The ease with which a listed company obtains access
to new capital. Often investor relations activities help to
develops relationships with the investor community over
time so that participants become aware of the company
and its investment

Investor relations will not automatically guarantee a company a heightened profile, easy access to capital, liquidity in its shares or a fair
share price. There are other external factors in addition to a companys own performance, including economic factors, confidence in the
management and the competition for investors money which can have an impact on how a company is perceived by the investor community

Investor relations

Output Information
through investor relations

Investor
community

Company

\\ Institutional investors
\\ Private investors
\\ Analysts
\\ Media
Result

\\ Convening a general assembly and its agenda

As it serves as a function to inform and update the investment

community, investor relations activity is very much seen as a
regular ongoing responsibility rather than an occasional one.
The main activities of public and investor relations include:
\\ Shareholders and investor communications enabling
good decision making by information disclosure, resolving
issues, building communications by social partnership and
thereby strengthening shareholder loyalty
\\ Shareholders register
\\ Calling shareholders meetings
\\ Constituent, ordinary and extraordinary assembly
\\ Resolutions at shareholders meetings
\\ Releasing results to shareholders
\\ Replying to queries raised by shareholders
\\ Maintaining investor relations information on websites
\\ Rights and obligations

\\ Liquidity achieved by the companys shares. Regular updates to the investment community help create a higher profile forthe
company. Depending on the availability of shares, this can attract pools of buyers and sellers and increase the potential for
higher frequency trading in the companys shares.
\\ Fair valuation of the companys shares. Communication with the investment community enables a company to record its
performance and its strategy using publicly disclosed information. It also helps a company to understand how it is being
evaluated and whether the markets expectations are in line with its own
\\ Availability of information for market ranking in terms of size, profitability, growth, etc. can help in peer benchmarking by investors.

Return

Disclosure related to securities

Liquidity

Easier access to
capital

47

Listing Guide

Fair valuation

Role Of The Capital Market Authority (CMA)

48

49

Listing Guide

Role of the Capital Market Authority (CMA)

Flow of regulatory functions

Formation
of the Capital
Market Law

Introduction to CMA
The Capital Market Law was promulgated through Royal
decree No. M/30 issued on 1424H/2003G. Article 4 of the
Capital Market Law officially established the Capital Market
Authority with the objective of formulating regulations to
ensure an appropriate investment environment and the
protection of investors in the Saudi Arabian capital market.

Functions and responsibilities of CMA

Formation
of the Capital
Market

CMAs functions are to regulate and develop the Saudi

Arabian capital market by issuing the rules and regulations
required to implement the provisions of the Capital Market
Law. The basic objectives are to create an appropriate
investment environment, boost investor confidence,
reinforce transparency and disclosure standards across all
the listed companies and protect investors and dealers from
illegal acts in the market.

Duties of CMA
\\
\\
\\
\\
\\
\\
\\
\\
\\
\\
\\
\\

Prudential Rules
The Resolution of Securities Disputes Proceedings Regulations
Anti-Money Laundering and Counter-Terrorist Financing Rules
Merger and Acquisition Regulations
Investment Funds Regulations
Corporate Governance Regulations
Real Estate Investment Funds Regulations
Securities Business Regulations
Authorised Persons Regulations
Market Conduct Regulations
Offers of Securities Regulations
Listing Rules

CMA is broadly entrusted with the following duties:

\\ Regulate and develop the capital market and promote
appropriate standards and techniques for all sections
and entities involved in Securities Trade Operations
\\ Protect investors and the public from unfair and
unsound practices involving fraud, deceit, cheating,
manipulation, and inside information trading

Who is classified as an Insider?

Market Conduct Regulations define the standard code of

conduct for all participants to ensure the smooth functioning
of the market and provide various rules to be followed by all
market participants.
Some of the provisions and contents of the market conduct
regulations from a broader perspective are:

An individual who is a key member of the management of

the company or who has any family relationship with the
management of the company or a business or contractual
relationship with the management of the company would be
considered an insider. An insider is also someone who has
access to non-public information.

Prohibition of manipulation and deceptive acts or practices

1. Any person or organization is prohibited from engaging
in any activity relating to manipulation of the market or
any acts of deception in connection with an order placed
or transaction in a security.
2. No person or company shall directly or indirectly place
an order or execute a transaction to give a false or
misleading impression of trading activities or influence
the market to create an artificial bid, price or trade price
for any security.
3. Any action, including making a fictitious trade or effecting
a trade in a security that involves no change in its
beneficial ownership, will be considered as manipulative
or deceptive.
4. Entering an order(s) for the sale/purchase of a security
with the prior knowledge that an order(s) of substantially
the same size, time and price for the sale/purchase of
that security, has or will be entered is prohibited.
5. Purchasing or making offers to purchase/sell a security in
a pattern of successively higher or lower prices.

\\ Maintain fairness, efficiency, and transparency in

transactions of securities

6. Entering an order(s) for the sale/purchase of a security to

predetermine the sale, ask or bid price.

\\ Develop appropriate measures to reduce risks pertaining

to transactions of securities

Insider trading

\\ Develop, regulate, and monitor the issuance of

securities and under-trading transactions
\\ Regulate and monitor the activities of entities working
under CMA
\\ Regulate and monitor full disclosure of information
related to securities and issuers.

50

Market Conduct Regulations

What is Insider trading?

Insider trading is the buying or selling of any companys
shares or other security listed on the stock exchange,
by an individual or a group of individuals, who have
access to non-public information about the company and
take advantage of such information for vested interests.

What is non-public information?

Information about a company, whether positive or negative,
which is not in the public domain, but which may have a
material impact on the price of the stock when released.

Prohibition on disclosure of insider information

An individual who has any non-public information is prohibited
from disclosing such information to any other person who
would be able to take undue advantage for personal benefit.
An individual who is not an insider is also prohibited from
disclosing information about any companys security to any
individual who may trade in the security based upon the
information received.

Untrue statements
What is an untrue statement?
A statement is considered to be untrue in the following cases:
\\ Discloses false or inaccurate information
\\ Influences another person to make false or inaccurate
information
\\ Misrepresents material fact in a statement
\\ Influences another person to misrepresent a material fact
\\ Hides a material fact linked to a statement while it is
being made
Market conduct prohibits any individual from furnishing untrue
statements to influence the price of securities in the capital market.

Liability for quoting untrue statement

A person making an untrue statement shall be liable to
compensate a claimant who incurs a loss from acting upon the
untrue statement which otherwise would not have been incurred.

51

Listing Guide

GCC markets performance indices over the past three years

BSE

QSE

DFM

120.0%

Please refer to Article 14 of the CMA Listing Rules

which are available at www.cma.org.sa

Listing of foreign companies in Saudi

Arabia/Dual listing

%-7.19

%5.56

%18.36
18.6%
%11.99

63.1%
%14.23

24.2%

27.2%

17.2%

%18.6
25.5%

%63.1

2012
2012

1.2%

%27.2

%17.2
19.9%
%24.2
9.5%

2.1%
%25.5

%9.5

%19.9

2011

The listing of a companys shares on a different

exchange than its primary and original stock
exchange is called a cross-listing (or dual-listing).
The Listing Rules issued by the CMA now allow for
the cross-listing of foreign listed entities.

Would be permitted
if listing rules in foreign

The regulations highlighted in the previous pages

provide references to important rules for market
conduct. For more details, please refer to Market
Conduct Regulations issued by the board of CMA at
www.cma.org.sa

exchange are similar to

Saudi listing rules

2013
2013

2014
Source: Saudi stock exchange (Tadawul)

52

What is cross-listing?

Apply to
Capital Market Authority for
listing in Saudi

%-13.43

%-30.0

%-2.37

%-15.0

-4.8%

-30.0%

%0.0

-6.8%

-15.0%

%15.0

%1.2
6%

0.0%

%30.0

-15.7%

15.0%

%45.0

%-6.8
-17.0%
%-4.8
-11.7%

30.0%

%60.0

%6

45.0%

%75.0

%2.1
1.1%

60.0%

%90.0

-16.4%

75.0%

MSM

%105.0

-20.1%

90.0%

%120.0

-3.1%

105.0%

ADX

Foreign company
listed on foreign
exchange

107.7%

KSE

%107.7

TASI

Foreign companies intending to list their securities

on Tadawul will have to make an application to
CMA. New regulations only permit cross-listing of
securities. Approval would be at the sole discretion
of CMA after being satisfied with regard to the
similarity of Listing Rules in the foreign exchange.

Listing on
Tadawul if
complies with
the conditions

53

Listing Guide

Tadawul is the most liquid market in the GCC

Tadawul value traded represents 72.5% of GCC total traded value in 2014.
KSE

BSE

QSE

DFM

ADX

MSM
107.7%

TASI
120.0%

130.00
125.00

105.0%

120.00

18.6%

24.2%

MSCI EM
MSCI EURO (DM)
MSCI North America (DM)

100.00

MSCI World (DM)

MSCI FM

85.00

MSCI GCC Ex. KSA

54

r-1
4
No
ve
m
be
r-1
4
De
ce
m
be
r-1
4

be

Source: Saudi stock exchange (Tadawul)

Oc

to

r-1

em
be

gu

st
-1

pt
Se

14

Au

ly-
Ju

ne

-1

4
Ju

-1
ay
M

-1
ril
Ap

-1

ch

ar
M

ry
ua
br

ar

2013

Fe

nu

2012

Ja

2011

-1
4

80.00
y-

2014

MSCI Far East (DM)

90.00

% 0.8

% 6.3

% 12.9

% 2.6

27.2%

17.2%

25.5%

110.00

95.00

% 4.8

-4.8%

-6.8%

-15.7%

-11.7%

-17.0%

-16.4%

-20.1%

-30.0%

-3.1%

0.0%

TASI

105.00

% 0.1

6%

15.0%

2.1%

1.1%

30.0%

1.2%

19.9%

45.0%

9.5%

60.0%

115.00

14

75.0%

63.1%

% 72.5

90.0%

-15.0%

TASI is within the average of some leading emerging markets

Source: Saudi stock exchange (Tadawul) & MSCI Indices

55

Listing Guide

2012
End 2011

Bursa
Malaysia
2013
End 2012

Singapore
Exchange

Shenzhen
SE

Bombay
SE

Hong Kong
Exchanges

2014
End 2013

00

Saudi Stock
Market
Tadawul

269.1%
206.0%%265.7
%341.7
265.7%

Singapore
Exchange

2013

Shenzhent
SE

Bombay
SE

%46.3
42.7%

Bursa
Malaysia

%39.164.0%
%42.7
39.1%

113.5%

MKB
(Istanbul)
2012

%206.0

209.5%
%214.2
%188.2
214.2%
Egyptian
Exchange

%8.7
7.4%

50
50

%8.7
14.7%
%7.4
8.7%

100
100

%113.5

150
150

Source: Saudi Stock Exchange (Tadawul) & World Federation of Exchanges (WFE)

56

200
200

%30.2
33.1%
%21.0
30.2%
%38.4
21.0%

11,38,834
1,558,300

10,07,183
1,263,335
12,63,335
1,138,834

7,44,413
752,831

5,98,273
765,078
7,65,078
744,413

3,95,624
466,588
4,66,588
500,387

1,97,074
315,198
3,15,198
195,746
1,95,746
219,763
MKB
(Istanbul)

250
250

%33.5
47.7%
%37.7
33.5%
%36.1
37.7%

Egyptian
Exchange

300
300

%26.6
34.4%
%29.6
26.6%
%29.6
29.6%

Saudi Stock
Market
Tadawul

61,630
70,084

0
0

48,682
59,182
59,182
61,630

5,00,000
5,00,000

4,67,428
483,438

10,00,000
10,00,000

3,38,890
373,424
3,73,424
467,428

15,00,000
15,00,000

5,00,387
459,004

20,00,000
20,00,000

10,54,685
1,150,172
11,50,172
1,452,154

25,00,000
25,00,000

14,52,154
2,072,420

30,00,000
30,00,000

The average of velocity compared to emerging market in last three years

86.5% %137.8
%78.1
137.8%
%118.4
78.1%

35,00,000
35,00,000

31,00,777
3,233,031

22,58,035
2,831,946
28,31,946
3,100,777

Market capitalization of Tadawul compared to market capitalization of emerging market in last three years

Hong Kong
Exchanges

2014

Avg. 2011

Avg. 2012

Avg. 2013

Source: Saudi Stock Exchange (Tadawul) & World Federation of Exchanges (WFE)

57

Listing Guide

58

59

Tadawul Services
Listing Guide

Tadawul services

Tadawuls services

Trading services provide the following advantages:

Tadawul provides three core services:

Flexibility

Trading
Services

Depository
Services

Listing
Services

Orders placed in the market can stay for:

1.

One day

2.

Current week

3.

Current month

4.

Up to 30 days

Transparency

Fairness

Market prices and announcements are instantly

notified to banks, third party vendors and investors
and published on Tadawuls website.

Provides equal access to the market for all market

participants, maintains trade execution priorities,
and provides an electronic order form via brokers to
ensure geographic equality of service.

Fill or Kill order where the order will be

automatically cancelled if not filled immediately.

Depository services

2. Saving, maintaining and updating shareholder

records: After the company has been listed, one of the

Tadawul also performs the functions of the Securities

Trading services
Trading services include buying, selling, clearing and settlement of shares. Tadawul trading services combine all local equity
trading into one single market.
Its trading services also provide the transfer of ownership immediately after matching the buy and sell orders. It has an
efficient and short trading cycle and enables trading strategies that ensure that investors may buy and sell multiple times
during the day. It also provides accurate and speedy settlement to ensure that 100% of all trades are settled on the day
of execution.

60

major challenges it faces is maintaining a database of

Depository Centre wherein it executes transactions related to

its shareholders. Tadawul provides services to ensure

deposits, transfers, settlements, clearing and registration of

saving, maintaining, and updating shareholders records

ownership. The goals and functions of a Securities Depository

on a regular basis.

Centre are:
1. Advanced Technology: It is the prime function of

3. Rules and regulations implementation:

Tadawul ensures that it adopts and implements rules,

the stock exchange to provide the required variety of

policies and procedures fairly and effectively, while

technically advanced services for issuers, members and

reducing risks related to the market operation.

investors in Tadawul.

61

Listing Guide

4. Saving documents and transactions:

The Depository Centre is also responsible for saving
documents for transactions and transfers on the records
of the shareholders, including those related to family
and inheritance matters.
5. Services provided to unlisted issuers:
The Depository Centre provides services such as registry
services, managing corporate actions such as IPO,
capital increase/decrease, mergers and acquisitions,
shareholders general meetings, management and
e-voting services, sharebook reporting, dividend
entitlement and payment status, electronic ownership
inquiries, etc. to unlisted issues.

Additional services
Tadawul provides the following additional services to various
listed and unlisted companies that helps in increasing the
level of confidence and transparency, bridging the gap

Listing allows companies and owners to use the capital

market to raise funds needed for expansion and other
purposes and is one of the services provided by Tadawul.

corporate governance obligations by prohibiting

applying Corporate Governance:

shareholders using different communication channels.

6. Sharebook reporting: Tadawulaty offers a

on company resolutions without attending the general

service which allows issuers to obtain a list of

meetings. This facility helps in increasing shareholder

their shareholders at a specific date. This list of

participation and hence the efficiency and effectiveness

shareholders called the Sharebook Report can facilitate

of shareholder meetings is improved.

communication between the issuer, shareholder and

2. AGM management: Integrated management services

Tadawul.
7. Media centre service: The media centre is designed to

general meetings including conditions of voting, voting

host many activities of listed companies including:

ballots, collection and counting of votes, and other

\\ Signing agreements with IPO managers

administrative aspects.

\\ Holding meetings and assemblies

3. Dividend entitlement & payment status: Dividend

Whenever a company plans to list itself, it receives the

reporting services provide a unified communication

benefits and faces the challenges discussed earlier in

and reporting service to allow investors to extract

this Guide.

entitlement reports. It also provides a means for issuers

http://tadawulaty.tadawul.com.sa

5. Tawasul services: Tawasul provides a full infrastructure

for issues to maintain regular communication with

1. Electronic voting: The opportunity for investors to vote

For more details, please refer to Tadawultrys website at:

executives (insiders) from dealing in securities.

between companies and their shareholders and also helps in

to various companies for the smooth conduct of

Listing services

4. Trading restriction services: Assists in maintaining

\\ Organizing events related to listing the shares

of a company on its first day of trading
\\ Organizing the ordinary, extraordinary meetings.

to report dividend payment status to investors and

whether payments have been received or not.

62

63

Listing Guide

FAQs and Glossary

64

65

Listing Guide

FAQs
What is Tadawuls role?

What is the roadmap for the IPO?

Tadawul Operates the market effectively and efficiently,

ensures market integrity, quality and fairness, supports
investor education and awareness efforts develop service
excellence for customers (brokers, issuers, investors,
vendors, etc.) Also, develops the Exchanges capabilities and
competencies.

\\ Company decision

What is CMAs role?

\\ IPO Book building

CMAs functions are to regulate and develop the Saudi

Arabian capital market by issuing the rules and regulations
required to implement the provisions of the Capital Market
Law. The basic objectives are to create an appropriate
investment environment, boost investor confidence,
reinforce transparency and disclosure standards across all
the listed companies and protect investors and dealers from
illegal acts in the market.

\\ Subscription Period

Why should I list my company on Tadawul?

Tadawul provides a platform for companies to attract various
investors through access to the exchanges large liquidity
pool and borad investor base complimented by its state
of the art trading infrastructure which connects investors,
traders and brokers. Saudi Arabia being the largest economy
within the region adds to the strategic significance of
Tadawul and enhances its attractiveness further.

What are the requirements for IPO?

The requirements for initial public offering are:
\\ Appoint an independent financial advisor and
legal advisor
\\ Saudi joint stock company

\\ Appoint Advisors
\\ Preparation Phase
\\ Submit IPO Application
\\ CMA review and decision

\\ List on Tadawul
For further details, please refer to page 24.

What is the time period to list?

The execution process of an IPO event itself generally
lasts for 6 to 12 months at least. The overall timeframe
for realizing substantial value from an IPO begins at least
1-2 years before the actual listing and continues well
beyond that.
For more details about time period, please refer to page 25.

How does an IPO get valued?

The valuation of the company and the related price at which
the shares are offered to the investors is a critical aspect of the
IPO preparation phase. The following are different valuation
methods that are typically adopted to value a business:
\\ Discounted cash flow method
\\ Comparable company method
\\ Net asset value method

\\ It has 3 years audited financial statements

For more details about the evaluation, please refer to

page 32.

\\ The aggregate value of shares listed must be at least

SR100 million

What is the average cost for the IPO?

For further details about IPO requirements, please refer

to page 20.

66

There is no fixed cost related to listing of shares as the listing

costs associated with the share offerings vary from company
to company. In general, the cost is based on various factors

such as the readiness and complexity of the company and

experience of the professional advisors.

Do you have questions regarding Public

Offering and Listing?

For more details about the average cost, please refer to 37.

We in Primary Markets work on support public offering

and adding verity in investments opportunities in the
Saudi Capital Market; Stocks, Sukuk, bonds and Exchange
Traded Funds, by cooperating with related parties in raising
issuers awareness of listing and its benefits and challenges
and what follows with providing companies assistance to
complete the listing by clarifying regulatory requirement and
all needed support.

What is corporate governance?

The CMA regulations define corporate governance as
a mechanism to control and direct all the companys
activities to protect the rights of the shareholders and other
stakeholders (such as employees, customers and suppliers).
The governance framework constitutes a coherent set of
procedures and organizational arrangements that govern the
relationship between the shareholders, board of directors
and executive management that are aimed at achieving the
companys long-term strategic objectives.
For more details about the corporate governance, please
refer to page 42.

Does Tadawul provide services for unlisted

companies?
Tadawul provides services for closed joint-stock companies
such as:
\\ Maintaining accurate ownership records
\\ Ownership transfers
\\ Deposit shares in portfolios

For more information you can visit the Listing page on

Tadawuls website or alternatively you can request a
member of our Primary Markets team to visit your premises
or Tadawuls to present the listing requirements, benefits
and challenges and answer any other questions that you
may have. Contact details are provided below.
Phone: +966 11 218 9717

+966 11 218 9254
E-mail: Pm@tadawul.com.sa
Address: 6897 King Fahd Road Al Olaya

Unit No: 15

Riyadh 12211 3388

Kingdom of Saudi Arabia

\\ Recording pledges
\\ Conducting corporate actions, such as capital increase/
decrease, mergers, or acquisitions
\\ Shareholders general meetings management & e-voting
services
\\ Electronic Share book reporting
\\ Electronic ownership inquiries
There is a team that can visit your company to present and
answer your questions regarding Tadawuls services for
closed joint-stock.

67

Listing Guide

Glossary
CMA

M&A

Capital Market Authority is the regulatory body which

Mergers and acquisition. A situation where one company

governs the functioning of the capital market in the Kingdom

merges with another to extinguish its existence or acquires

of Saudi Arabia.

another company to extinguish the existence of the acquired

EBITDA

company.

Earnings before interest, tax, depreciation and amortization.

Private placement

It is one of the calculations used to measure the financial

A form of IPO wherein securities are issued to a limited

performance of a company.

group of investors to raise funds. Regulatory requirements

EPS

for a private placement are usually less onerous than for an

Earning per share. As the name indicates, it is the earnings

IPO.

available to common shareholders, measured in terms of

SAMA

currency units per share.

Saudi Arabian Monetary Agency is the central bank of the

Institutional investors

Kingdom of Saudi Arabia and prior to the formation of CMA

Institutions which invest large amount of money in capital

was the regulatory body for the Saudi capital market.

market such as banks, asset management companies,

SOCPA

insurance companies, pension funds and other financial

Saudi Organization for Certified Public Accountants is the

service providers.

professional organization for independent public accountants

IPO

which works to promote accounting and auditing under the

Initial Public Offering is the first opportunity given to the

supervision of the Ministry of Commerce.

public to invest in the equity of a private company, and for a

TASI

private company to raise funds from the public.

Tadawul All Share Index is an index (barometer) used to

Listing

measure the performance of securities listed on Tadawul.

Admission of a security into a stock exchange for trading

purposes.

68

Disclaimer
This guide (the Listing Guide) and its contents are the sole property of the Saudi Stock Exchange (Tadawul).
It has been prepared with an intention to create awareness and a better understanding of the listing process and
to provide information relating to Tadawul and its activities. It is neither a comprehensive reference document
with respect to all IPO related material and requirements. It has not been written with an intention to provide each
and every guideline or requirements that need to be fulfilled to enable issuers to list shares. Anyone intending to
list shares of their companies must follow and meet all listing related requirements issued by the Capital Market
Authority (CMA). Additionally, the Listing Guide should not be relied upon or used as a substitute for specific legal
advice, financial advice or other applicable advice. It is recommended that readers seek appropriate professional
advice before taking any action.
The information contained herein is subject to change without any prior notice. The Saudi Stock Exchange (Tadawul) or
any other party associated with the preparation of the Listing Guide would like to highlight that the Listing Guide does
not purport to provide investment advice, nor do they bear the responsibility for any errors or omissions contained
herein. The Saudi Stock Exchange (Tadawul) or any other party associated with the preparation of the Guide disclaims
any liability whatsoever towards any party and makes no representations or guarantee and assumes no liability in
relation with the contents of the Listing Guide or any errors or omissions of information. The information contained in
this Listing Guide cannot be used for any claim, demand or cause action against Saudi Stock Exchange (Tadawul) or
any other party associated with the preparation of the Listing Guide.

Address and Contact Details

6897 King Fahd Road Al Olaya
Unit No: 15
Riyadh 12211 3388
Kingdom of Saudi Arabia
Main number: + 966 11 218 9999
Customer services number: + 966 11 218 9090
Web: www.tadawul.com.sa
For more information on primary markets please contact us at:
Tel: + 966 11 218 9717
Tel: + 966 11 218 9254
Fax: + 966 11 218 9252
Email: pm@tadawul.com.sa

For other enquiries, please contact us at:

info@tadawul.com.sa
Link for other services:
http://tadawulaty.tadawul.com.sa

Listing Guide 2015 First Edition