Saudi Arabia's IPO market is currently experiencing its weakest performance in many years.
As of this year, only three companies—Dar Al Balad, Saleh Abdulaziz Al Rashed, and MSGA—have listed on the Saudi Tadawul Exchange and its smaller parallel market, Nomu, raising a combined $144 million.
In comparison, Saudi companies raised $3.7 billion through stock offerings last year, surpassing the total raised by all other Gulf countries combined. According to the Saudi Exchange 2025 Annual Report, 17 companies went public in 2022, raising a total of $9.8 billion.
Through the first eight months of this year, the $144 million represented only 4% of the $3.53 billion raised through IPOs during the same period in 2025. A total of 25 companies went public in the first eight months of 2025.
Weak issuance sentiment stems largely from a pricing impasse between company owners and investors. Company owners are unwilling to list at valuations the market is willing to accept, while investors are reluctant to pay higher prices after most IPOs last year incurred losses.
According to Bloomberg data, only 4 out of the 17 companies listed on the country’s main board since 2025 have stock prices above their issue price.
Mutlaq Al Ghowairi, Arabian Dyar, and Kesay Clinics, all originally planned to list in Saudi Arabia, have postponed their listings this year; the six-month extensions granted to Alandalus Educational and Alromansiah have now expired.
Ongoing U.S.-Iran tensions have added another layer of uncertainty, but Saudi Arabia’s IPO market was already under pressure before the conflict erupted.
In addition to market valuation compression, liquidity is also weakening, as investors become more selective amid rising capital costs and risk premiums.
Poor overall performance has prompted Saudi Arabia's capital markets regulator, the Capital Market Authority (CMA), to propose a package of reforms to revitalize the Tadawul exchange.
Most notably, regulators propose that underwriting commitments take effect at the start of the book-building process. This means that if investors do not subscribe to all IPO shares, underwriters will be required to purchase the remaining shares, potentially even the entire offering.
“I believe 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 Awwal Bank that provides brokerage and investment banking services.
This will help foster greater discipline in valuation and ensure more reasonable transaction pricing.
By shifting more IPO execution and financing risk to institutional investors and underwriters, some industry insiders expect institutions, especially underwriters, to become more selective about the deals they participate in. They will face greater financing and execution risk starting from the book-building stage.
Tahir Abbas, Research Director at Oman-based Ubhar Capital, said: “This could mean a reduction in trading activity in the short term, particularly for smaller issuers or those priced too aggressively relative to current market multiples.”
In my view, such a trade-off is justified if it leads to more fairly priced IPOs, stronger post-listing performance, and greater investor confidence. The goal should shift from maximizing the number of listings to building a more sustainable IPO market where the quality of demand is as important as the size of the order book.
These reforms also require companies to disclose forward-looking statements, projections, and financial performance metrics covering at least the next year, which should help foster more sustainable demand after listing.
Alowedi said, "In the absence of firm underwriting commitments and formal forward-looking guidance, accountability for issuers and underwriters remains relatively weak."
Some recent IPOs, after entering the market, have failed to meet the expectations informally communicated to institutional investors during the IPO process, based on their fundamental performance shortly after listing.
The latest CMA proposal is part of its broader effort to stimulate trading and enhance Tadaur's performance.
In August, the CMA revised its derivatives trading rules to attract more foreign investors and enhance liquidity.
The revisions include lowering trading fees and introducing a group of market makers to ensure investors can more easily find counterparties.
In mid-September, Bloomberg reported that, according to a recent notice from the CMA, Saudi Arabia's Public Monetary Market Fund is required to limit its overseas investments and held assets to no more than 5% within two years.
The announcement states that, due to new restrictions on overseas investments, money market funds could bring up to $7 billion in capital inflows into Saudi domestic assets.
Reforms relaxing foreign investment restrictions in Saudi Arabia took effect in early February, replacing the previous Qualified Foreign Investor system.
In the same month, the CMA also stated that it is reviewing a proposal to raise the foreign ownership cap and aims to implement this change this year, although no specific date has been announced yet.
Currently, foreign investors are limited to owning a maximum of 49% of a Saudi company, making Saudi Arabia the only major Gulf market with such a cap. Morgan Stanley analysts estimate that fully removing this restriction could attract approximately $7.4 billion in investment to the Saudi stock market.
Abbas said, "Raising the foreign ownership limit by 49% will be a significant step, especially for large global investors requiring substantial position sizes."
It is also important to open the market to all categories of foreign investors in February, but the equity holding cap remains the more critical factor limiting foreign institutional participation.
The sluggish IPO activity in the Gulf region is prompting companies such as HSBC and EFG Hermes to turn their attention to equity opportunities in markets like Egypt, Turkey, and India.
This year, Turkey’s secondary equity offerings have raised $1.6 billion, nearly double the amount raised during the same period last year. HSBC leads the rankings in Turkey with 7 transactions totaling $552 million in proceeds, compared to just 2 transactions totaling $260 million last year.
The slowdown in IPOs has also led law firms such as Baker McKenzie, Akin, and their competitors to increasingly shift toward debt and M&A services to keep their capital markets teams busy.
Bloomberg data shows that the value of such transactions involving Gulf entities nearly doubled to around $300 billion in the first half of this year.
In contrast, there is currently little indication that listing activity will rebound soon.
Abbas said he expects IPO activity in Saudi Arabia in the fourth quarter of this year to remain very limited, or possibly nonexistent.
“The issuer may still remain sensitive to market liquidity, valuation levels, and geopolitical risks, but activity does not necessarily have to wait until regional conflicts are fully resolved to resume,” he said.
If volatility subsides and liquidity improves, the IPO window could reopen before then.
Looking ahead to 2027, he expects the pipeline of upcoming listings to remain substantial, with approximately eight to ten listings currently in progress.
These pipelines include financial services, healthcare, industrial, and consumer companies, but many names are still in the announced or preparatory stages rather than having received CMA approval.
Abbas added, "The timing will largely depend on market conditions and achievable valuations."
The key test will be whether the CMA reforms can restore confidence in price discovery and convert strong primary market demand into better post-listing performance.