The Capital Market Authority Adopts the Updated Instructions on Book Building and Allocation of Shares in IPOs

​The CMA board issued its resolution to adopt the updated Instructions on Book Building and Allocation of Shares in IPOs. This Updated Instructions shall be effective from the date of publication.

The instructions amendment comes in continuance to the Authority's efforts to regulate the processes of book building and allocation of shares in IPOs, by taking advantage of the past experience of adopting the instructions on 15/10/1437H corresponding with 20/07/2017G. And in line with the best international practices in this field.

The CMA stated that pursuance to its devotion to contact and consult with public investors and government and private entities regarding regulations projects before issuing them, the CMA published the instructions previously to obtain the public's view and opinions. Subsequently, the CMA received many comments and suggestions from different entities and individuals, which all were taken into consideration.

The CMA added that the amendment of the instructions aims to enhance the role of the capital market in facilitating financing, increasing the attractiveness of the market to investors and stimulating investment opportunities, in line with the strategic plans of the Authority.

The amendment instructions has dealt with widening the scope of the participating parties, which will increase the pricing efficiency. The categories participating in the book building process were expanded to include GCC investors of legal personality. The amendment draft also attended to lifting some of the restrictions related to determining the price range and the full coverage of the offering by the participating parties. Moreover, the amendment draft included the change of the mechanism of determining the subscription price by allowing the financial advisor in coordination with issuer to determine the subscription price according to the supply and demand forces, with consideration to a number of other controls which will ensure the investors protection. The amendment also aimed at changing of the mechanism of share allocation by allowing more flexibility into it, leading to the increase of the market efficiency.

The instructions can be viewed through the following link:

Instructions Book Building Allocation