Saudi Arabia makes IPO underwriters take risk earlier

Saudi Arabia’s Capital Market Authority has put new IPO rules into force that make the institutions arranging a listing commit sooner and investors’ demand harder to exaggerate. Before the price-setting book-building stage begins, the underwriter must have a binding agreement to buy all shares on offer—a bigger risk than simply marketing the deal. Institutional investors’ orders must be backed by cash or cash equivalents and become binding by the payment deadline, while companies must include clear, reasonably grounded financial forecasts covering the rest of the current period and at least the following year. The aim is to make the demand used to set an IPO price reflect money that is actually available, while giving investors a clearer view of the business behind the shares.