Concerns Raised as Saudi IPO Retail Allocation Ratio Increases, Regulators Face Dilemma
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Glonghui, February 9th|According to informed sources, the Saudi market regulator is under pressure to reassess its guidance encouraging issuers to allocate up to 30% of IPO shares to local retail investors, as this move may further weaken listing performance. Several banks have pressured the regulator, stating that allocating too many shares to retail investors during a period of weak market demand may be detrimental to pricing and trading performance. Sources also pointed out that this guidance has reduced the allocation ratio for overseas institutional investors, which runs counter to recent reforms aimed at attracting more foreign capital into the Saudi stock market. Although no formal rules have been issued yet, the regulator has hinted since the end of last year that issuers seeking listing approval should increase the retail allocation ratio from about 10% previously to 20%. Sources revealed that some banks, including some of Saudi Arabia's largest equity market advisors, are planning to submit written complaints to the regulator.
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