Saudi Stock Exchange Proposes Lowering SME Entry Barriers

The Saudi Stock Exchange has initiated a consultation process to seek public opinion on proposed regulatory changes aimed at lowering the entry barriers for small and medium-sized enterprises (SMEs) on its Nomu market. The proposed reforms seek to redefine the criteria for "qualified investors" and relax the listing requirements for the Nomu market, which is analogous to the domestic small and medium-sized enterprise board market. This move is part of the exchange's implementation of the "2030 Vision," a strategic framework designed to diversify the Saudi economy and reduce its dependence on oil.

The proposed changes also aim to align existing regulations with the updated provisions of the new Companies Law. By doing so, the exchange hopes to create a more favorable environment for SMEs to access capital markets, thereby fostering economic growth and innovation. The consultation process is a crucial step in gathering feedback from stakeholders, including investors, companies, and regulatory bodies, to ensure that the new regulations are comprehensive and effective.

The Nomu market, established to support the growth of SMEs, has been instrumental in providing a platform for these enterprises to raise funds and expand their operations. However, the current listing requirements and investor qualifications have been seen as barriers for many SMEs seeking to list on the market. The proposed reforms are expected to address these issues by lowering the financial thresholds and simplifying the listing process, making it more accessible for a broader range of companies.

One of the key proposals is the introduction of a new category for qualified investors in the Nomu market, expanding the range of institutional and individual investors who can participate. Under the revised rules, qualified investors in the Nomu market will include capital market institutions, investment funds, enterprises from Gulf Cooperation Council (GCC) member states, qualified foreign financial institutions, and certain high-net-worth individuals. The net asset threshold for individual investors will remain at 5 million Saudi riyals (approximately 1.33 million USD), but the minimum securities market trading volume over the past year may be reduced from 40 million riyals to 30 million riyals, effectively lowering the entry barrier for active investors.

Additionally, the exchange proposes adjustments to the market value and liquidity standards for companies listing on the Nomu market. The minimum market value for listing could be reduced to 30 million riyals or 20% of the circulating shares, whichever is lower. For the expected total market value of listed stocks, the initial public offering (IPO) could be set at 10 million riyals, while direct listing could be set at 100 million riyals. The new rules also empower the Capital Market Authority (CMA) to approve lower standards if a company can demonstrate sufficient investor demand and stock liquidity.

Another focus of the revision is to align the Saudi Stock Exchange's rules with regulatory changes under the new Companies Law, particularly regarding the restructuring and listing of companies after spin-offs or separations. The exchange has opened a 14-day public consultation period, during which interested parties can submit feedback via email. The final rule changes will be published after review and approval by the Saudi Capital Market Authority.

This initiative by the Saudi Stock Exchange to lower the entry barriers for SMEs on the Nomu market is a significant step towards achieving the goals of the "2030 Vision." By creating a more inclusive and accessible capital market, the exchange aims to support the growth and development of SMEs, which are crucial for economic diversification and job creation. The consultation process is an essential component of this effort, as it ensures that the new regulations are developed with the input and support of all relevant stakeholders.