Saudi market rules ready for Aramco IPO

End of June eyed as mechanism is put in place to prevent large share price drops

Saudi Arabia expects to unveil by the end of June rules to prevent large share price drops in newly-listed companies, the final regulatory step for the listing of oil giant Saudi Aramco, the head of the kingdom’s stock market regulator said.

The mechanism, known as price stabilisation, is common on developed markets and allows underwriters of an initial public offering (IPO) to use some of the company’s stock to bolster its price, should it fall in the days after it starts trading, or the volume of shares changing hands is weak.

The kingdom has been overhauling its stock market rules to prepare for the local listing of state-owned Aramco, which is hoping to raise $100 billion (Dh367.2 billion) or more through a 5 per cent stake sale later this year.

Saudi authorities have also said they want Aramco, whose IPO is billed as the world’s largest, to have an international listing, although no decision has been made on the location.

This listing could be delayed until Aramco starts trading on the Tadawul, as the Saudi stock exchange is known.

Calculation

The Capital Market Authority (CMA) issued updated rules in the last couple of months covering how securities are sold in the kingdom and how the offer price of an IPO is calculated using the bookbuild method, Mohammad Al Kuwaiz, chairman of the market regulator, told a media event in New York late Wednesday.

“Once [the price stabilisation guideline] is issued, we can then say that the Saudi market will be fully amenable to accommodate an offering of the size of Saudi Aramco, or indeed of any size,” he said.

Speaking on the sidelines of the event, Al Kuwaiz said drafting of the regulation was at “an advanced stage”, and it will be issued before the end of the first half of the year.

The CMA was also expecting to start work by the end of the year on rules governing dual-listings on the Saudi stock market that would be sent out for market feedback early in 2019, Al Kuwaiz said. The timetable could be brought forward if a company approached it wanting to list on another market, he added.

Once (the price stabilisation guideline) is issued, we can then say that the Saudi market will be fully amenable to accommodate an offering of the size of Saudi Aramco, or indeed of any size.”

Mohammad Al Kuwaiz | Chairman of CMA