Capital Market Authority: Direct Listing Project for Subsidiary Companies

The Saudi Capital Market Authority (CMA), in a move aimed at transforming market mechanisms, has announced the direct listing of subsidiaries of companies listed on the main market. The CMA has set a 30-day consultation period, ending on 8 Shawwal 1447 AH, corresponding to March 27, 2026.

Context of financial sector development and Vision 2030

This proposal is part of ongoing efforts to develop the Saudi Stock Exchange (Tadawul) in line with the objectives of Vision 2030 and the Financial Sector Development Program. Through these flexible regulations, the Kingdom aims to strengthen its position as a regional and global financial center and attract more domestic and foreign capital. The shift towards diverse listing options, such as direct listing, is a global practice followed by developed markets to increase market efficiency and depth.

Direct listing mechanism and cost reduction

The proposed project primarily aims to enable subsidiaries of companies listed on the main market to list their shares directly without having to go through the initial public offering (IPO) . The importance of this step lies in the following:

• Shortening time and procedures: Skipping the stages of building an order book and lengthy promotional tours.
• Cost reduction: Lowering expenses associated with IPOs and underwriting fees.
• Product diversification: Providing new investment opportunities in specific sectors where subsidiaries may operate independently from the parent company.

Expected economic impact locally and regionally

This regulation is expected to have a broad positive impact on the local economy and financial market, as it allows large conglomerates to unlock the value of their assets. Subsidiaries are often undervalued when they are part of a large holding company; therefore, separating and listing them independently allows the market to price them more efficiently. Regionally, this move enhances the attractiveness of the Saudi market to foreign investors seeking targeted exposure to specific sectors without having to invest in the diversified parent company.

Transparency and commitment to disclosure

Despite the facilitations offered, the Authority's draft law emphasizes its commitment to transparency standards. The proposal stresses the importance of adhering to proper disclosure requirements, mandating the submission of registration document to the Authority. This document includes essential information such as the mechanism for determining the indicative share price and a statement of the risks associated with this mechanism, thereby ensuring the protection of investors' rights and maintaining high levels of confidence in the financial market.