The IPO market in Saudi Arabia is currently facing its weakest performance in many years.
As of this year, on the Saudi Tadawul Exchange and its smaller parallel market Nomu, only three companies are listed – Dar Al Balad, Saleh Abdulaziz Al Rashed, and MSGA – which have raised a total of 144 million US dollars.
In contrast, Saudi companies raised $3.7 billion through stock issuance last year, exceeding the total amount raised by other countries in the Gulf region. According to the "Saudi Exchange 2025 Annual Report," 17 companies went public in 2022, raising a total of $9.8 billion.
As of the first eight months of this year, these $144 million only represent 4% of the $3.53 billion in fundraising for IPO during the same period in 2025. A total of 25 companies went public in the first eight months of 2025.
The low willingness to issue shares is largely due to a pricing stalemate between company owners and investors. Company owners are reluctant to list their companies at a valuation that the market is willing to accept, while investors, after witnessing losses on most new shares last year, are also unwilling to pay higher prices.
Bloomberg data shows that among the 17 companies that have listed on the main board of that country since 2025, only 4 have stock prices higher than their issue prices.
The three companies, Mutlaq Al Ghowairi, Arabian Dyar, and Kesay Clinics, which were originally planned to go public in Saudi Arabia, have all postponed their listings this year; meanwhile, the six-month extensions granted to Alandalus Educational and Alromansiah have now expired.
The ongoing US-Iran conflict has added another layer of uncertainty, but even before the outbreak of the conflict, Saudi Arabia's IPO market was already under pressure.
In addition to the compression of market valuations, liquidity is also weakening. As capital costs and risk premiums rise, investors have become more selective.
Poor overall performance has prompted the Saudi market regulator, the Capital Markets Authority ( CMA ), to propose a package of reforms in order to revitalize the Tadawul Exchange.
Notably, regulatory authorities have proposed that underwriting commitments take effect at the beginning of the bookbuilding process. This means that if investors do not subscribe to all of the IPO shares, underwriters will be required to purchase the remaining portion and may even have to assume the entire issuance.
"I believe that the proposed rules should enhance accountability, improve disclosure, and strengthen price discovery," said Osama Alowedi, founder and CEO of Riyadh Asset Management Company EQCM and former Chief Investment Officer of SAB Invest, a subsidiary of Saudi Aramco Bank. SAB Invest provides brokerage and investment banking services.
"This will help to establish greater discipline in valuation and ensure that transaction pricing is more reasonable."
By transferring more execution and financing risks associated with IPO to institutional investors and underwriters, some industry insiders expect that institutions, particularly underwriters, will become more selective in the transactions they participate in. Starting from the bookkeeping and documentation phase, they will face greater financing and execution risks.
Ubhar Capital, headquartered in Oman, research director Tahir Abbas stated: "This may mean that transactions will decrease in the short term, especially for smaller issuers, or for those with pricing that is too aggressive relative to the current market multiples."
In my opinion, if this can lead to more reasonably priced IPO, better performance after listing, and greater investor confidence, then such a trade-off is justified. The focus should shift from maximizing the number of listings to establishing a more sustainable IPO market, where the quality of demand is just as important as the size of the order book.
These reforms also require companies to disclose forward-looking statements, forecasts, and financial performance indicators covering at least the next year, which should help to create more sustainable demand after listing.
Alowedi said, 'In the absence of firm underwriting commitments and formal forward-looking expectations, the accountability of both the issuer and the underwriter is relatively weak.'
"Some of the recent IPO entries into the market have not met the fundamental performance expectations that were informally communicated to institutional investors during the IPO process, despite being listed not long ago."
The latest CMA proposal is part of a broader effort aimed at stimulating transactions and enhancing the performance of Tadawul.
In August, CMA revised its derivatives trading rules in order to attract more foreign investors and enhance liquidity.
The revisions include lowering transaction fees and introducing a group of companies to act as market makers to ensure that investors can more easily find trading counterparts.
Bloomberg reported in mid-September that the Saudi Public Monetary Market Fund was required to limit the proportion of its overseas investments and holdings to within 5% within two years, according to a recent announcement from CMA.
The announcement states that with the new restrictions on overseas investments, money market funds could potentially bring in up to $7 billion in capital flows into Saudi domestic assets.
Saudi Arabia's reform to relax foreign investment restrictions came into effect at the beginning of February, replacing the previous Qualified Foreign Investor (QFI) system.
In the same month, CMA also indicated that a proposal to raise the upper limit on foreign shareholding was under consideration, and hoped to implement this change this year, although no specific date has been announced yet.
Currently, foreign investors are allowed to hold a maximum of 49% of the shares in a Saudi company, which makes Saudi Arabia the only major Gulf market with such a limit. Analysts at Morgan Stanley estimate that if this restriction were completely lifted, it could attract approximately $7.4 billion in capital to the Saudi stock market.
Abbas indicates: 'Raising the foreign ownership limit by 49% will be an important step, especially for large global investors who require a larger holding scale.'
"It is also important to open the market to all categories of foreign investors in February, but the upper limit on shareholding remains the more critical factor that restricts the participation of foreign institutions."
The downturn in the Gulf region IPO is prompting companies, including HSBC and EFG Hermes, to turn their attention to equity opportunities in markets such as Egypt, Turkey, and India.
As of this year, Turkish secondary stock offerings have raised $1.6 billion, nearly twice the amount from the same period last year. HSBC tops the list in Turkey, completing 7 transactions and raising a total of $552 million; last year, there were only 2 transactions, raising a total of $260 million.
The slowdown has also prompted firms such as Baker McKenzie ( Baker McKenzie ), Akin , and their competitors to increasingly turn to debt and mergers and acquisitions (M&A) business in order to keep their capital markets teams busy.
Bloomberg data shows that the value of such transactions involving Gulf entities nearly doubled in the first half of this year, reaching approximately $300 billion.
In contrast, there are currently almost no signs that listing activities will pick up soon.
Abbas indicates that he expects Saudi Arabia's IPO activities in the fourth quarter of this year to remain very limited, or even possibly non-existent at all.
"Issuers may still be sensitive to market liquidity, valuation levels, and geopolitical risks, but activities do not necessarily have to wait until regional conflicts are completely resolved before resuming," he said.
"If volatility eases and liquidity improves, the IPO window may reopen before that time."
Looking ahead to 2027, he expects that the pipeline for listings will still be quite substantial, with around 8 to 10 listings in progress.
These pipelines include financial services, healthcare, industrial, and consumer enterprises, but many of these names are still in the announced or preparation stage and have not yet been approved by CMA.
Abbas added, "The timing will largely depend on market conditions and the achievable valuation."
The key test will be whether the CMA reforms can restore confidence in price discovery and transform the strong primary market demand into better performance after listing.
